Question

4. Bank of Southern Vermont has determined that its inventory of 20 million euros (€) and...

4. Bank of Southern Vermont has determined that its inventory of 20 million euros (€) and 25 million British pounds (£) is subject to market risk. The spot exchange rates are $0.40/€ and $1.28/£, respectively. The σ’s of the spot exchange rates of the € and £, based on the daily changes of spot rates over the past six months, are 65 bp and 45 bp, respectively. Use adverse rate changes in the 90% confidence interval (critical value = 1.65 for 90% confidence interval).

Question: What is the DEAR of euros (€)?

5. Bank of Southern Vermont has determined that its inventory of 20 million euros (€) and 25 million British pounds (£) is subject to market risk. The spot exchange rates are $0.40/€ and $1.28/£, respectively. The σ’s of the spot exchange rates of the € and £, based on the daily changes of spot rates over the past six months, are 65 bp and 45 bp, respectively. Use adverse rate changes in the 90% confidence interval (critical value = 1.65 for 90% confidence interval).

Question:What is the DEAR of British pounds (£)?

Homework Answers

Answer #1

Sol:

DEAR of euros = $85800

DEAR of British Pound = $237600

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
An FI has £5 million in its trading portfolio on the close of business on a...
An FI has £5 million in its trading portfolio on the close of business on a particular day. The current exchange rate of pounds for dollars is £0.6400/$, or dollars for pounds is $1.5625, at the daily close. The volatility, or the standard deviation (σ), of daily percentage changes in the spot £/$ exchange rate over the past year was 58.5 bp. The FI is interested in adverse moves–bad moves that will not occur more than 1 percent of the...
Kelvin just purchased £15.2 million goods from a British exporter on credit due 90 days from...
Kelvin just purchased £15.2 million goods from a British exporter on credit due 90 days from today. The spot exchange rate is $1.21/£. The 90-day interest rates in the U.S. and the UK are 1 and 1.5 percent respectively. The 90-day forward rate on the pound is $1.2090/£. A 3-month call at strike price of $1.20/£ can be purchased at a premium of $0.016. A 3-month put option at strike price of $1.20/£ can be purchased at a premium of...
What tools could AA leaders have used to increase their awareness of internal and external issues?...
What tools could AA leaders have used to increase their awareness of internal and external issues? ???ALASKA AIRLINES: NAVIGATING CHANGE In the autumn of 2007, Alaska Airlines executives adjourned at the end of a long and stressful day in the midst of a multi-day strategic planning session. Most headed outside to relax, unwind and enjoy a bonfire on the shore of Semiahmoo Spit, outside the meeting venue in Blaine, a seaport town in northwest Washington state. Meanwhile, several members of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT