Exhibit 10-2 Volusia, Inc. Is a U.S.-Based Exporting Firm That Expects to Expects

question 80

Multiple Choice

Exhibit 10-2
Volusia, Inc. is a U.S.-based exporting firm that expects to receive payments denominated in both euros and Canadian dollars in one month. Based on today's spot rates, the dollar value of the funds to be received is estimated at $500,000 for the euros and $300,000 for the Canadian dollars. Based on data for the last 50 months, Volusia estimates the standard deviation of monthly percentage changes to be 8 percent for the euro and 3 percent for the Canadian dollar. The correlation coefficient between the euro and the Canadian dollar is 0.30.
-Refer to Exhibit 10-2. What is the portfolio standard deviation?

• A) 3.00 percent
• B) 5.44 percent
• C) 17.98 percent
• D) None of these are correct.

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Definitions:

Direct Labor Costs

Expenses associated with employees who are directly involved in the production of goods or services.

Work in Process

Inventory that includes partially completed goods that are still in the production process.

Wages Payable

An account that records the amounts owed to employees for work performed that has not yet been paid.

Factory Overhead

All indirect costs associated with the production process, such as maintenance, utilities, and management salaries, not directly tied to specific units of product.