exam 2 page 4

# exam 2 page 4 - \-'-' 15. The exchange exposure faced by...

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USE THE FOLLOWING INFORMATION TO ANS\MER THE NEXT THREE QUES- TIONS In the below table, Pn is the euro price of the asset held by the U.S. firm and P is the dollar price of the asset. A U.S. firm holds an asset in Fbance and faces the following scena.rio. Probability Spot rate P* P State 1 25% \$1.20l€ €1,500 \$1,800 State 2 25% \$1.10/€ €1,400 s1,540 State 3 25% \$1.00/€ €1,190 s1,180 State 4 25% \$o.eol€ €1,200 \$1,090 13. The eUeE[eelya]ue of the investmenljn U.S. dollars is: ,/-\ (b) \$1,403 (c) \$1,405 (d) \$1,430 14. The variance of the exchange rate is: (a) 0.0100 (b) 0.0145 (c) -0.0145 /-:\. L (d) p.0i25 \-'-'
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Unformatted text preview: \-'-' 15. The exchange exposure faced by the U.S. firm is (a) 252 ((b))2'520 (g z+o (d) 2,400 \ J ') '} rl <_,\ J \ J l r -, | ..-/ f r\F\ o U J Ar^r . . 1 ) J a I ',1 , t t v f) c\ V*. lJ i t rlL\C lqD-aac- jaO ?'*l* v S- 5) * '{? n is .Cbn{sAb , l,il*be b 'CDDu;a u b^ kaa qqe l?*nnxF E=?rnvb .lr-, 1%0 0 l as {bo _a ,*.'*r, l5E 0 !. i* 4\, ,elb ;i" li t0 l,CU {ti } ,}b *u iLes .Qr-: g* "d},b sp, * \ab ):= a1 ? .L\-r5 (_j; ?rub (r. LL) /' *\r la . v F- \Jt it-v [b,P) 1 ') 04 a-) / i a tr3 r A ? 1 +F\ [ t l ' r ^ ^ l J D 1 ' ) *L.d_ A, I n...
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## This note was uploaded on 04/03/2012 for the course BUS 428 taught by Professor Xu during the Spring '11 term at Rhode Island.

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