3. A-Z Corporation would like to borrow for 6 months in Yen and Euro. The following market information is available to the company. Mean effective 6-month rate on Yen = 4% Mean effective 6-month rate on Euro = 10% Std. Dev for Yen effective rate = 0.10 Std. Dev for Euro effective rate = 0.25 Correlation of Yen and Euro effective rates = 0.35 a) What is the expected effective financing rate and the Std. Dev of effective financing if the portfolio contemplated by A-Z Corp consists of 35% Yen and 65% Euro? [Ans: Rip = 7.9%; 0ip = 17.78% ] b) Assume now that the Yen and the Euro are perfectly negatively correlated. Compute the relevant weights for the Yen and the Euro to construct a portfolio with zero risk and obtain the resultant effective financing rate. [Ans: W1 = 5/7: W2 = 2/7: Rip = 5.71%] 3. A-Z Corporation would like to borrow for 6 months in Yen and Euro. The following market information is available to the company. Mean effective 6-month rate on Yen = 4% Mean effective 6-month rate on Euro = 10% Std. Dev for Yen effective rate = 0.10 Std. Dev for Euro effective rate = 0.25 Correlation of Yen and Euro effective rates = 0.35 a) What is the expected effective financing rate and the Std. Dev of effective financing if the portfolio contemplated by A-Z Corp consists of 35% Yen and 65% Euro? [Ans: Rip = 7.9%; 0ip = 17.78% ] b) Assume now that the Yen and the Euro are perfectly negatively correlated. Compute the relevant weights for the Yen and the Euro to construct a portfolio with zero risk and obtain the resultant effective financing rate. [Ans: W1 = 5/7: W2 = 2/7: Rip = 5.71%]