Suppose that you hold a piece of land in the city of London that you...
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Suppose that you hold a piece of land in the city of London that you may want to sell in one year As a US resident, you are concerned with the dollar value of the land. Assume that if the British economy booms in the future, the land will be worth $2,000, and one British pound will be worth $180. If the British economy slows down on the other hand, the land will be worth less, say, 1500, but the pound will be stronger, say, $1.90 You feel that the British economy will experience a boom with a 60 percent probability and a slowdown with a 40 percent probability a. Estimate your exposure (6) to the exchange risk. (Negative amount should be indicated by a minus sign.) Exposure b. Compute the variance of the dollar value of your property that is attributable to exchange rate uncertainty Variance ho
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