Cameron Plc Would Like to Simultaneously Borrow Japanese Yen (¥)

question 41

Multiple Choice

Cameron plc would like to simultaneously borrow Japanese yen (¥) and Sudanese dinar (SDD) for a six-month period. Cameron would like to determine the expected financing rate and the variance of a portfolio consisting of 30 per cent yen and 70 per cent dinar. Cameron has gathered the following information: Mean effective financing rate of Japanese yen for six months 4 per cent Mean effective financing rate of Sudanese dinar for six months 1 per cent Standard deviation of Japanese yen's effective financing rate 0.10 Standard deviation of Sudanese dinar's effective financing rate 0.20 Correlation coefficient of effective financing rates of these two currencies 0.23 What is the expected financing rate of the portfolio contemplated by Cameron plc?

• A) 3.10%
• B) 1.90%
• C) 17.00%
• D) 13.00%
• E) None of the above

---

Definitions:

Rate Of Inflation

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Supply And Demand

The relationship between the quantity of a commodity available and the desire for that commodity, determining its market price.

Interest Rate

The proportion of a total amount of money that is levied for borrowing it, commonly stated as a yearly percentage rate.

Loanable Funds

The money available for borrowing, which comes from savings and is demanded by borrowers for investment.