Jensen Co. expects to pay €50,000 in one month for its imports from France. It also expects to receive €200,000 for its exports to Belgium in one month. Jensen estimates the standard deviation of monthly percentage changes of the euro to be 2.5 percent over the last 50 months. Assume that these percentage changes are normally distributed. Using the value-at-risk (VAR) method based on a 95% confidence level, what is the maximum one month loss in dollars if the expected percentage change of the euro during next month is -1%? Assume that current spot rate of the euro (before considering the maximum one-month loss) is $1.35.
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Magent Co. is a U.S. company that has exposure to the Swiss…
Magent Co. is a U.S. company that has exposure to the Swiss francs (SF) and Danish kroner (DK). It has net inflows of SF200 million and net outflows of DK500 million. The present exchange rate of the SF is about $.40 while the present exchange rate of the DK is $.10. Magent Co. has not hedged these positions. The SF and DK are highly correlated in their movements against the dollar. If the dollar strengthens, then Magent Co. will:
A purely domestic firm is never exposed to exchange rate flu…
A purely domestic firm is never exposed to exchange rate fluctuations.
The Fed’s indirect method of intervention is to trade dollar…
The Fed’s indirect method of intervention is to trade dollars for or against other currencies.
Which statements are true? A triple bond is consists of two…
Which statements are true? A triple bond is consists of two σ-bonds and one π-bond A double bond consists of one σ-bond and one π-bond A Single bond consist of one σ-bond
American Bank quotes a bid rate of $0.026 and an ask rate of…
American Bank quotes a bid rate of $0.026 and an ask rate of $0.028 for the Indian rupee (INR); National Bank quotes a bid rate of $0.024 and an ask rate for $0.025. Locational arbitrage would involve:
U.S. Jordan 360-day borrowing rate 6% 5% 3…
U.S. Jordan 360-day borrowing rate 6% 5% 360-day deposit rate 5% 4% Perkins Corp. will receive 250,000 Jordanian dinar (JOD) in 360 days. The current spot rate of the dinar is $1.48, while the 360-day forward rate is $1.50. How much will Perkins receive in 360 days from implementing a money market hedge (assume any receipts before the date of the receivable are invested)?
What is the oxidation number for the Br atom in HBrO4?
What is the oxidation number for the Br atom in HBrO4?
A portfolio of currency cash inflows is more volatile if the…
A portfolio of currency cash inflows is more volatile if the correlations are high.
Normally, when a pegged exchange rate is broken because of a…
Normally, when a pegged exchange rate is broken because of a crisis in that country, there is downward pressure on the local currency of that country.