(1)(a) Tomorrow, ABC firm based in NYC expects to receive twenty million Yen for its consultancy services to a Japanese firm. Today, the Yen depreciated 2% against the U.S. dollar. ABC is apprehensive about continued decline in the value of the Yen. As a result, ABC wants to estimate possible one day loss with 99% confidence. To do this, it finds that the average percentage movement in the Yen exchange rate over a 150-day period is 2.1%. If the firm expects the Yen to depreciate by one percent, estimate the amount the firm expects to lose given that the spot rate is $ 0.0092. (b) Briefly, discuss the factors that affect the size of this possible one-day loss.

(1)(a) Tomorrow, ABC firm based in NYC expects to receive twenty million Yen for its consultancy services to a Japanese firm. Today, the Yen depreciated 2% against the U.S. dollar. ABC is apprehensive about continued decline in the value of the Yen. As a result, ABC wants to estimate possible one day loss with 99% confidence. To do this, it finds that the average percentage movement in the Yen exchange rate over a 150-day period is 2.1%. If the firm expects the Yen to depreciate by one percent, estimate the amount the firm expects to lose given that the spot rate is $ 0.0092. (b) Briefly, discuss the factors that affect the size of this possible one-day loss.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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