Suppose you are a German investor. You just acquired Catch, an Australian online business.

You are concerned with the EUR value of your foreign investment

As an economist, you estimate 3 scenarios for the future, as described in the table below:

Scenario	Probability	Forecast exchange rate (/A$)	Forecast asset value (in AUD)
1	0.25	1.8517	AUD 350,000.00
2	0.3	1.8901	AUD 500,000.00
3	0.45	1.9102	AUD 710,000.00

(a) Estimate your exposure to the exchange risk.[6 MARKS]

(b)How would you hedge this exposure? Suppose the forward rate is 1.8895 EUR/AUD. Calculate the EUR value of the hedged portfolio under each of the scenarios above [4 MARKS]

IN YOUR CALCULATION, KEEP 4 DECIMAL POINTS FOR THE EXCHANGE RATES, AND NO DECIMAL POINTS FOR CURRENCY NUMBERS.