The return on the Rush Corporation in the state of recession is estimated to be -23% and the return on Rush in the state of boom is estimated to be 32%. The return on the Oberman Corporation in the state of recession is estimated to be 45% and the return on Oberman in the state of boom is estimated to be -16%. Given this information, what is the covariance between Rush and Oberman if there is a 0.70 probability that the economy will be in the state of boom and a 0.30 probability that the economy will be in the state of recession. Place your answer in decimal form and not as a percentage

The return on the Rush Corporation in the state of recession is estimated to be -23% and the return on Rush in the state of boom is estimated to be 32%. The return on the Oberman Corporation in the state of recession is estimated to be 45% and the return on Oberman in the state of boom is estimated to be -16%. Given this information, what is the covariance between Rush and Oberman if there is a 0.70 probability that the economy will be in the state of boom and a 0.30 probability that the economy will be in the state of recession. Place your answer in decimal form and not as a percentage

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter10: Measuring Exposure To Exchange Rate Fluctuations

Section: Chapter Questions

Problem 40QA

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Concept explainers

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.

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