(a) Bank of Bentley has determined that its inventory of yen () and Swiss franc (SFr) denominated securities is subject to market risk. The spot exchange rates are 120.00/$ and SFr0.9500/$, respectively. The standard deviations of the spot exchange rates of the and SFr, based on the daily changes of spot rates over the past six months, are 75 basis points (bp) and 55 bp, respectively. Using adverse rate changes in the 99th percentile, the 10-day VARs for the two currencies, and SFr, are $350,000 and $500,000, respectively. Calculate the yen and Swiss franc-denominated value positions for Bank of Bentley. (10 marks)

(b) Assume that the maximum loss as a percentage of capital is 9% of a financial institutions capital to a particular sector and that the amount recovered per dollar of defaulted loans in this sector is 70%. What is the concentration limit (round to two decimals)? (3 marks)