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Cerra Co. expects to receive 5 million euros tomorrow as a result of selling goods to the Netherlands. Cerra estimates the standard deviation of daily
Cerra Co. expects to receive 5 million euros tomorrow as a result of selling goods to the Netherlands. Cerra estimates the standard deviation of daily percentage changes of the euro to be 1 percent over the last 100 days. Assume that these percentage changes are normally distributed. Use the value-at-risk (VAR) method based on a 98% confidence level for the following question(s).
What is the maximum one-day loss if the expected percentage change of the euro tomorrow is 0.5%?
a. 2.2%
b. 1.46
c. 0.5%
d. 1.2%
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