Suppose that in Problem 5.15 the correlation between the S&P 500 Index

(measured in dollars) and the FTSE 100 Index (measured in sterling) is 0.7, the correlation between the S&P 500 Index (measured in dollars) and the USD/GBP exchange rate is 0.3, and the daily volatility of the S&P 500 Index is 1.6%. What is the correlation between the S&P 500 Index (measured in dollars) and the FTSE 100 Index when it is translated to dollars? (Hint: For three variables X, Y, and Z, the Covariance between X + Y and Z equals the Covariance between X and Z plus the Covariance between Y and Z.)