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A multinational corporation is expecting cash flows in two currencies, X and Y. The standard deviation of monthly percentage changes in X is 16% and

A multinational corporation is expecting cash flows in two currencies, X and Y. The standard deviation of monthly percentage changes in X is 16% and in Y it is 3%. Their correlation is 0.3.

Part 1

If 50% of portfolio value is denominated in currency X and 50% in Y, what is the standard deviation of the portfolio?

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