Suppose you are a venture capitalist holds a major stake in an e$-$commerce start$-$up in Miami, Florida. As a Canadian resident, you are concerned with theCanadian dollar value of your American equity position.If the American economy booms in the future, your equity stake will be worth USD $700,000$ andthe exchange rate will be CAD $1\mathrm{.}20/$ USD $1.$ If the American economy grows at a normal pace,your stake will be worth USD $600,000$ and the exchange rate will be CAD $1\mathrm{.}15/$ USD $1.$ If theAmerican economy experiences a recession, your stake will be worth only USD $450,000$ and theexchange rate will be CAD $1\mathrm{.}00/$ USD $1.$You assess that there is a $40\%$ chance of a boom, a $30\%$ chance of a normal pace, and a $30\%$chance of a recession.

a$)$ Estimate your exposure to exchange risk.

$|$b$)$ Compute the variance of the Canadian dollar value of your American equityposition that is attributable to the exchange rate uncertainty