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6) Based on the following information about the future poss foreign assets, you have computed Var(S)=0.00666667 and forward hedge, what will be the value of your hedged pos exchange rate is 1.4$/£? State 1 23 3 Prob. P* 1/3 £1000 1/3 £1,000 1/3 £1,100 S($/£) 1.4 1.5 1.6 P(=SP*) $1,400 $1,500 $1,760

6) Based on the following information about the future poss foreign assets, you have computed Var(S)=0.00666667 and forward hedge, what will be the value of your hedged pos exchange rate is 1.4$/£? State 1 23 3 Prob. P* 1/3 £1000 1/3 £1,000 1/3 £1,100 S($/£) 1.4 1.5 1.6 P(=SP*) $1,400 $1,500 $1,760

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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6) Based on the following information about the future possible exchange rates and the value of your foreign assets, you have computed Var(S)=0.00666667 and Cov(P,S)=12. If you use the appropriate forward hedge, what will be the value of your hedged position in a situation when the future spot exchange rate is 1.4$/£? State Prob. P* 1 2 3 1/3 £1000 1/3 1/3 £1,000 £1,100 S($/£) 1.4 1.5 1.6 P(=SP*) $1,400 $1,500 $1,760
Transcribed Image Text:6) Based on the following information about the future possible exchange rates and the value of your foreign assets, you have computed Var(S)=0.00666667 and Cov(P,S)=12. If you use the appropriate forward hedge, what will be the value of your hedged position in a situation when the future spot exchange rate is 1.4$/£? State Prob. P* 1 2 3 1/3 £1000 1/3 1/3 £1,000 £1,100 S($/£) 1.4 1.5 1.6 P(=SP*) $1,400 $1,500 $1,760
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