Imagine that you are managing a trading portfolio with 100 shares of stock in Samsung. The current price is 12,800 Won (the South Korean currency). The standard deviation of the daily return on Samsung estimated over the past 3 months is 1 percent. The $/Won exchange rate is currently 1/980 (that is $1 = 980 Won), and the standard deviation of the exchange rate (in percentage terms) is 0.4% per day, again using the past 3 months of data. Also, the correlation between the percentage change in the exchange rate and the return on Samsung is estimated to be equal to 0.5. Use delta normal to compute the 1-day, 99% VAR for the portfolio from the perspective of a US bank (i.e. in US dollars). a) $38 b) $44 c) $48 d) $52 e) $56

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