Q.4:- Following are the direct exchange rates of Euro (EUR) and Canadian Dollar (CAD) at the beginning of each of the last 10 months are given. Year EUR/USD 2011 $1.39 2012 $1.28 2013 $1.33 2014 $1.33 2015 $1.11 2016 $1.11 2017 $1.13 2018 $1.18 2019 $1.12 2020 $1.14 CAD/USD $1.01 $1.00 $0.97 $0.91 $0.78 $0.76 $0.77 $0.77 $0.75 $0.75 a). It is forecasted that the Euro will appreciate by 4 percent over the next year but it is realized that there is much uncertainty revolving around this forecast. Using the Value at risk method estimate the maximum level of depreciation in the Euro in coming year. b) Assume that Canadian Dollar is expected to depreciate by 3 percent in coming year but again this forecast is uncertain, therefore you need to estimate maximum level of depreciation using the value at risk method over the next year. Note: Estimate your answer based on 95 percent confidence level.
Q.4:- Following are the direct exchange rates of Euro (EUR) and Canadian Dollar (CAD) at the beginning of each of the last 10 months are given. Year EUR/USD 2011 $1.39 2012 $1.28 2013 $1.33 2014 $1.33 2015 $1.11 2016 $1.11 2017 $1.13 2018 $1.18 2019 $1.12 2020 $1.14 CAD/USD $1.01 $1.00 $0.97 $0.91 $0.78 $0.76 $0.77 $0.77 $0.75 $0.75 a). It is forecasted that the Euro will appreciate by 4 percent over the next year but it is realized that there is much uncertainty revolving around this forecast. Using the Value at risk method estimate the maximum level of depreciation in the Euro in coming year. b) Assume that Canadian Dollar is expected to depreciate by 3 percent in coming year but again this forecast is uncertain, therefore you need to estimate maximum level of depreciation using the value at risk method over the next year. Note: Estimate your answer based on 95 percent confidence level.
Chapter4: Exchange Rate Determination
Section: Chapter Questions
Problem 3IEE
Related questions
Question
None
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you