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Estimate your exposure to exchange rate risk

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Reference no: EM132036153

Question

A U.S. firm has a subsidiary in Great Britain and faces the following scenario:


 Probability Spot Rate C* C Proceeds from Fwd. contract Dollar value of hedged position
State 1 40% $2.50/£ £2,000


State 2 60% $2.30/£ £2,500


a. Fill in the dollar value of the cash flow (C) in the table above.

b. Estimate your exposure to exchange rate risk (b).

Reference no: EM132036153

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