Question
CanDo Co. will receive 3.5 million euros in a month as a result of selling goods to a customer in Germany. CanDo estimates the standard
CanDo Co. will receive 3.5 million euros in a month as a result of selling goods to a customer in Germany. CanDo estimates the standard deviation of daily percentage changes of the euro to be 1 percent over the last 365 days. Assume that these percentage changes are normally distributed. The current spot rate of the euro (before considering the maximum one-day loss) is A$1.41. What is the maximum one-month loss in Australian dollars if the expected percentage change of the euro tomorrow is 0.11%? Use the value-at-risk (VAR) method based on a 90% (t-stat = 1.65) confidence level. A. -$76,000. B. -$60,600. C. -$62,100. D. -$63,000. E. -$64,300.
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