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

question 68

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.
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-Refer to Exhibit 10-2. Assuming an expected percentage change of 0 percent for each currency during the next month, what is the maximum one-month loss of the currency portfolio? Use a 95 percent confidence level and assume the monthly percentage changes for each currency are normally distributed.

• A) -9 percent
• B) -30 percent
• C) -5 percent
• D) None of these are correct.

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Definitions:

Bloody Show

indicates the passage of a small amount of blood or blood-tinged mucus through the vagina, signifying the beginning of labor.

Water Breaking

The rupture of the amniotic sac surrounding a fetus, which releases amniotic fluid signaling the onset of labor.

Contractions

The tightening and relaxation of uterine muscles, experienced by pregnant women, that can indicate the onset of labor or be part of Braxton Hicks practice contractions.

Transition Phase

In labor and childbirth, this term describes the final phase of the first stage of labor, characterized by intense contractions and dilation of the cervix from 7 to 10 centimeters.