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3. Assume that you work for company that conducts most of its international business in Mexico and estimates its net cash flows next quarter
3. Assume that you work for company that conducts most of its international business in Mexico and estimates its net cash flows next quarter from Mexico will be $20,000,000USD (i.e., after converting from MXN to USD). You estimate that the standard deviation of quarterly percentage changes of the MXN is 5 percent and that the MXN will depreciate by 2 percent against the U.S. dollar over the next quarter. If your boss asks you to use the value at risk (VaR) method to estimate the company's maximum expected loss due to its transaction exposure to Mexican pesos (MXN) over the next quarter, how much is the VaR both in percentage terms and dollar terms?
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