Question
Yarmouk , Inc. is a Jordanian . - based exporting firm that expects to receive payments denominated in both Saudi Riyal and Egyptian Pounds in
Yarmouk , Inc. is a Jordanian . - based exporting firm that expects to receive payments denominated in both Saudi Riyal and Egyptian Pounds in one month . Based on today's spot rates , the Jordanian Dinar value of the funds to be received is estimated at JOD 500,000 for the Saudi Riyal and JOD300,000 for the Egyptian Pounds . Based on data for the last Eighty months , Yarmouk , estimates the standard deviation of monthly percentage changes to be 8 percent for the Saudi Riyal and 3 percent for the Egyptian Pounds . The correlation coefficient between the Saudi Riyal and the Egyptian Pounds is 0.30 . Assuming an expected percentage charge of 1 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 .
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