Question
Consider an MNC that is exposed to the Taiwan dollar (TWD) and the Egyptian pound (EGP). 25% of the MNCs funds are Taiwan dollars and
Consider an MNC that is exposed to the Taiwan dollar (TWD) and the Egyptian pound (EGP).
25% of the MNCs funds are Taiwan dollars and 75% are pounds. The standard deviation of
exchange movements is 7% for Taiwan dollars and 5% for pounds. The correlation coefficient
between movements in the value of the Taiwan dollar and the pound is 0.70. Based on this
information, the standard deviation of this two-currency portfolio is:
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International Finance Transactions Policy And Regulation
Authors: Hal S. Scott
15th Edition
159941547X, 978-1599415475
