Consider an MNC That Is Exposed to the Bulgarian Lev

question 8

Multiple Choice

Consider an MNC that is exposed to the Bulgarian lev (BGL) and the Romanian leu (ROL) . 30% of the MNC's funds are lev and 70% are leu. The standard deviation of exchange movements is 10% for lev and 15% for leu. The correlation coefficient between movements in the value of the lev and the leu is 0.85. Based on this information, the standard deviation of this two-currency portfolio is approximately:

• A) 17.28%.
• B) 13.15%.
• C) 14.50%.
• D) 12.04%.

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good or service and the quantity of it that consumers are willing to purchase at various prices.

Future Price Decline

The expectation that the price of goods or services will decrease in the future, often influencing consumer and business decisions.

Leftward Shift

In economic terms, a movement of the supply or demand curve to the left on a graph, indicating a decrease in supply or demand.

Demand Curve

A demand curve is a graphical representation that shows the relationship between the price of a good or service and the quantity of it that consumers are willing to purchase at various prices.