Due to the immense pressure on the economy of Afghanistan the dollar value has steadily put increasing against AFS. Given below are the average prices for the last 7 months:

July 2020 77.00

June 2020 77.07

May 2020 77.00

April 2020 76.50

March 2020 76.10

Feb. 2020 76.00

Jan 2020 76.10

Your organization is expecting to receive funds from donor in the end of August 2020 and is worried about future value of dollars because of the rumors that government may lift the lockdown which indeed eases the pressure from USD. As an experienced analyst you are required to help in identifying maximum loss for one month using value at risk approach. Furthermore, the expectation shows a 2% decrease in the value and top management wish to be 95% confident on results. You may also need to know that current spot rate is 77.15AFS per dollar.

Required:

1. What is the risk in the currency using the last 7 months data?
2. Explain the findings of your risk.
3. What will be the maximum one-month loss?
4. How the value of Maximum loss is different from -2% expected decrease in the USD value?
5. What will be future spot rate at end of August 2020?