Volusia,Inc

question 36

Multiple Choice

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 fifty 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.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) -9.00%.
• B) -30.00%.
• C) -5.00%.
• D) none of the above

---

Definitions:

Cash Withdrawal

The process of taking out cash from a bank account or the act of receiving cash from any fund, essentially reducing the balance.

T Accounts

A visual representation used in accounting to depict debits and credits for individual accounts, resembling the letter "T".

Horizontal Analysis

Horizontal analysis is a financial analysis tool used to compare financial data, such as revenues or balance sheet numbers, over multiple periods to identify trends and growth patterns.

Income Statements

A financial statement that shows a company's revenues, expenses, and profit over a specific period.