A Canadian firm holds an asset in France and faces the following scenario: Probability Spot rate...
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A Canadian firm holds an asset in France and faces the following scenario: Probability Spot rate Price of the euro- asset State 1 20% $1.6/euro euro 2,000 State 2 50% $1.65/euro euro 3,000 State 3 30% $1.70/euro euro 4,000 A. WHAT IS THE EXPECTED VALUE, E(P), OF THE INVESTMENT IN CAD? (HINT: GET THE PRO-RATED VALUE) B. WHAT IS THE VARIANCE, VAR(S), OF THE EXCHANGE RATE? (HINT: GOOGLE FORMULA FOR VARIANCE. YOUR MEAN WOULD BE THE PRORATED VALUE OF THE SPOT RATE (E(S). C. WHAT IS THE EXPOSURE, i.e. REGRESSION COEFFICIENT "BETA"? (Hint: You will need to calculate COV(P/S). Recall Beta COV(P/S) / VAR(S) A Canadian firm holds an asset in France and faces the following scenario: Probability Spot rate Price of the euro- asset State 1 20% $1.6/euro euro 2,000 State 2 50% $1.65/euro euro 3,000 State 3 30% $1.70/euro euro 4,000 A. WHAT IS THE EXPECTED VALUE, E(P), OF THE INVESTMENT IN CAD? (HINT: GET THE PRO-RATED VALUE) B. WHAT IS THE VARIANCE, VAR(S), OF THE EXCHANGE RATE? (HINT: GOOGLE FORMULA FOR VARIANCE. YOUR MEAN WOULD BE THE PRORATED VALUE OF THE SPOT RATE (E(S). C. WHAT IS THE EXPOSURE, i.e. REGRESSION COEFFICIENT "BETA"? (Hint: You will need to calculate COV(P/S). Recall Beta COV(P/S) / VAR(S)
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Related Book For
College Algebra
ISBN: 978-0134697024
12th edition
Authors: Margaret L. Lial, John Hornsby, David I. Schneider, Callie Daniels
Posted Date:
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