Suppose you are a British venture capitalist holding a major stake in an e-commerce start-up in Silicon Valley. As a British resident, you are concerned with the pound value of your U.S. equity position. Assume that if the American economy booms in the future, your other hand, your American equity stake will be worth $502,880, and the exchange rate will be $1.6/. You assess that the American economy will experience a boom with a 50 percent probability and a recession with a 50 percent probability. a. Estimate your exposure to the exchange risk. (Round final answer to nearest dollar.) b. Compute the variance of the pound value of your American equity position that is attributable to the exchange rate uncertainty. (Round final answer to nearest dollar.) You plan to visit Geneva, Switzerland, in three months to attend an international business conference. You expect to incur a total cost of SF7,400 for lodging, meals, and transportation during your stay. As of today, the spot exchange rate is $0.60/SF and the threemonth forward rate is $0.75/SF. You can buy the three-month call option on SF with an exercise price of $0.76/SF for the premium of $0.05 per SF. Assume that your expected future spot exchange rate is the same as the forward rate. The three-month interest rate is 8 percent per annum in the United States and 5 percent per annum in Switzerland. a. Calculate your expected dollar cost of buying SF7,400 if you choose to hedge by a call option on SF. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Calculate the future dollar cost of meeting this SF obligation if you decide to hedge using a forward contract. c. At what future spot exchange rate will you be indifferent between the forward and option market hedges? (Do not round intermediate calculations. Round your answer to 5 decimal places.)