​Consider an MNC That Is Exposed to the Bulgarian Lev

question 44

Multiple Choice

​Consider an MNC that is exposed to the Bulgarian lev (BGL) and the Romanian leu (ROL) ; 30 percent of the MNC's funds are lev and 70 percent are leu. The standard deviation of exchange movements is 10 percent for lev and 15 percent 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 percent.
• B) ​13.15 percent.
• C) ​14.50 percent.
• D) ​12.04 percent.

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