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Suppose you are British venture capitalist holding a major stake in an e-commerce start-up in...

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Suppose you are British venture capitalist holding a major stake in an e-commerce start-up in Silicon Valley. As a British resident, you are concerned with the pound value of your U.S. equity position. Assume that if the American economy booms in the future, your equilty stake will be worth $1,000,000, and the exchange rate will be 51.40/. If the American economy experiences a recession on the other hand, your American equity stake will be worth $500,000, and the exchange rate will be $160/. You msess that the American economy will experience a boom with a 70 percent probability and a recession with a 30 percent probability Which of the following would effectively hedge your exchange risk exposure? Sol 4511.976 forward Sell 4.511.976 forward Buy 3445231 forward Bu 53.445.231 forward

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