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A U.S. firm holds an asset in Great Britain and faces the following scenario: ...

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Finance

A U.S. firm holds an asset in Great Britain and faces the following scenario:

State 1 State 2 State 3
Probability 25% 50% 25%
Spot rate $ 2.20 / $ 2.00 / $ 1.80 /
P* 3,000 2,500 2,000
P $ 6,600 $ 5,000 $ 3,600

image

Multiple Choice

  • none of the options

  • $5,050

  • $2,112.50

  • $3,700

A U.S. firm holds an asset in Great Britain and faces the following scenar State 1 State 2 State 3 Probability 25% 50% 25% Spot rate $ 2.204 $ 2.00 $ 1.80 3,000 2,500 2,000 $6,600 $5,000 $3,600 ** where, p* = Pound sterling price of the asset held by the U.S. firm P= Dollar price of the same asset The expected value of the investment in U.S. dollars is

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