Consider an MNC That Is Exposed to the Bulgarian Lev

question 63

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 .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:

One-year Return

The total percentage return on an investment over a period of one year.

Dividend

A portion of a company's earnings distributed to shareholders, usually in the form of cash or stock.

PDQ Stock

is not a widely known key term and might refer to a specific stock symbol or an abbreviation within a particular context. Assuming it's not widely recognized, the answer would be NO.

Expected Return

The return an investor believes is most likely on an investment—that is, the investor understands that the actual return may be somewhat different in certain investments like stocks. The mean of the probability distribution of returns.