Referring to the equation Var(P) = b² Var(S) + Var(e), the venture capitalist can calculate Var(e) to understand the uncertainty that is attributable to the exchange rate uncertainty.

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True

False

Referring to the equation Var(P) = b² Var(S) + Var(e), the venture capitalist can Reduce Var (P) to zero via appropriate hedging.

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True

False

Referring to the equation Var(P) = b² Var(S) + Var(e), the venture capitalist can calculate Var(e) to understand the part of the uncertainty that can be eliminated via hedging.

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True

False

Referring to the equation Var(P) = b² Var(S) + Var(e), the venture capitalist can calculate b² Var(S) to understand the part of the uncertainty that is independent of exchange rate movements.

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True

False

A British venture capitalist holding a major stake in an e-commerce star-up in Silicon Valley should estimate his exposure to exchange risk by the regressing the GBP or USD Value of his equity position on the exchange rate USD/GBP or GBP/USD

GBP value

USD value

USD/GBP

GBP/USD