Exhibit 21-1 To Benefit from the Low Correlation Between the Trinidad Dollar

question 48

Multiple Choice

Exhibit 21-1
To benefit from the low correlation between the Trinidad dollar and the Japanese yen (¥) , Sciorra Corporation decides to invest 50 percent of total funds invested in Trinidad dollars and the remainder in yen. The domestic yield on a one-year deposit is 8 percent. The Trinidad one-year interest rate is 10 percent, and the Japanese one-year interest rate is 7 percent. Sciorra has determined the following possible percentage changes in the two individual currencies as follows:
​
-Refer to Exhibit 21-1 above. What is the expected effective yield of the portfolio Sciorra is contemplating (assume the two currencies move independently from one another) ?​

• A)6.47 percent
• B)8.84 percent
• C)8.50 percent
• D)none of the above

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