Can someone double check my work for b? Please & Thank you. 4. A US MNC tries to

Question

Can someone double check my work for b? Please & Thank you.

4. A US MNC tries to sell off its assets in France and retain US dollars back. Now the company is facing three scenarios, and the euro value of its French assets and the exchange rate under each scenario is indicated in the table below (a) Please answer the dollar value of the company's French assets under each case. State Eura ValueErchange Dollar Value Scenario 1 1/3 900 $1.35/E 900 1.35-S1215 Scenario 2 1/3 1,000 $1.50/ 1000*1.50-$1500 Scenario 3 1/3 1,100 $1.65/ 1.100*1.65 S1815 (b) Please solve for the economic exposure of the company's French assets. In other words, how does the change of exchange rate affect the dollar value of the assets. To answer this question, you need to build a model Dollar value of French Assetsalpha+ beta Exchange Rate And then solve for beta Hint: use the statistics function of your calculator. Choose linear regression for calculation. Computation of Means: SP= 1/3*(€ 1215HE I 500HE 1815)-€1510 SP= 1/3"($1 .35/EHE 1 .50/E+$ 1.65/E-S1.50/€ Variance and Covariance: VAR(S)-1/3**( 1.35/E-$1.50/€)2 + (1.50/€-1.50€)2t(1.65/E-1 .50/E)-0.01 5 COV (SP S)-1/3 *1215-1510*$1.35/ - S1.50/-30 Exposure Coefficient b-COV(LS/VAR(S)-30/0.015-2000

Explanation / Answer

Correct..Just reiterating the same:

VAR(Exchange rate)=1/3*(1.35-1.5)^2+1/3*(1.5-1.5)^2+1/3*(1.65-1.5)^2=0.015
COV(Dollarvalue,Exchnage rate)=1/3*(1215-1510)*(1.35-1.5)+1/3*(1500-1510)*(1.5-1.5)+1/3*(1815-1510)*(1.65-1.5)=30

beta=cov(dollarvalue,exchangerate)/var(exchange rate)=30/0.015=2000

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