Consider the following set of spot exchange rates:

$\backslash$table$[[,\backslash$table$[[$US $$],[$Equivalent$]],\backslash$table$[[$Foreign Currency$],[$per US $$]]],[$Swiss Franc,$\mathrm{.}8759,1\mathrm{.}1417],[$Euros$,$P$,1\mathrm{.}4135]]$

In the German market, the spot rate for the Swiss franc is $1\mathrm{.}20$ Euros.

a$)$ Set up a triangular arbitrage to exploit the difference between this rate and the cross$-$rate in the US market. Assume your initial purchase in the US is for $1,000,000$ francs or Euros $($whichever one you want to buy in the US$).$ What is your profit, in US dollars?

a$.$ $$15550$

b$.$ $$22416\mathrm{.}67$

c$.$ $$813$

d$.$ None of the above $($show answer$)$

e$.$ $$3332$

AD ADM Inc. is a U$.$S$.-$based exporting firm that expects to receive payments denominated in both euros and Canadian dollars in one month. Based on today's spot rates, the dollar value of the funds to be received is estimated at $$300,000$ for the euros and $$400,000$ for the Canadian dollars. Based on data for the last fifty months, Volusia estimates the standard deviation of monthly percentage changes to be $8$ percent for the euro and $3$ percent for the Canadian dollar. The correlation coefficient between the euro and the Canadian dollar is $0\mathrm{.}30.$

a$)$ What is the portfolio standard deviation?

$4$B$).$b b$)$ Assuming an expected percentage change of $5$ percent for each currency during the next month, what is the maximum one$-$month loss of the currency portfolio? Use a $95$ percent confidence level and assume the monthly percentage changes for each currency are normally distributed.

a$.5\mathrm{.}44\%,-4\%$

b$.5\mathrm{.}44\%,-3\mathrm{.}37\%$

c$.-5\mathrm{.}29\%,-5\mathrm{.}36\%$

d$.4\mathrm{.}266\%,-3\mathrm{.}37$&