Haines Co. expects to receive 5 million euros tomorrow as a result of selling goods to Belgium. Haines estimates the standard deviation of daily percentage changes of the euro to be 1 percent over the last 100 days. Assume that these percentage changes are normally distributed. Using the value-at-risk (VaR) method based on a 95% confidence level, what is the maximum one-day loss (in dollars) if the expected percentage change of the euro tomorrow is 0.5%?
Haines Co. expects to receive 5 million euros tomorrow as a result of selling goods to Belgium. Haines estimates the standard deviation of daily percentage changes of the euro to be 1 percent over the last 100 days. Assume that these percentage changes are normally distributed. Using the value-at-risk (VaR) method based on a 95% confidence level, what is the maximum one-day loss (in dollars) if the expected percentage change of the euro tomorrow is 0.5%?
Chapter10: Measuring Exposure To Exchange Rate Fluctuations
Section: Chapter Questions
Problem 33QA
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Haines Co. expects to receive 5 million euros tomorrow as a result of selling goods to Belgium. Haines estimates the standard deviation of daily percentage changes of the euro to be 1 percent over the last 100 days. Assume that these percentage changes are
-$110,000
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|
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-$57,500
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-$60,000
|
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-$75,000
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$-25,000
|
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