Washington Co. and Vermont Co. have no domestic business. They have a similar dollar equivalent amount of international exporting business. Washington Co. exports all of its products to Canada. Vermont Co. exports its products to Poland and Mexico, with about half of its business in each of these two countries. Each firm receives the currency of the country where it sends its exports. You obtain the end-of-month spot exchange rates of the currencies mentioned above during the end of each of the last 6 months. POLISH END OF CANADIAN MONTH DOLLAR MEXICAN PESO ZLOTY 1 $0.8140 $0.09341 $0.29908 2 0.8178 0.09428 0.29832 3 0.8380 0.09230 0.30180 4 0.8548 0.09245 0.30880 5 6 0.8512 0.8574 0.09238 0.09469 0.30272 0.30320 You want to assess the data in a logical manner to determine which firm has a higher degree of exchange rate risk. Complete the table below and make your conclusion. (Hint: The percentage change in the portfolio of currencies is a weighted average of the percentage change in each currency in the portfolio.) Do not round intermediate calculations. Round your answers for standard deviation to four decimal places and for maximum expected loss to two decimal places. Standard deviation Canadian $ Maximum expected loss 1.65 x Std. Dev. Mexican peso Polish zloty Portfolio -Select- has a higher degree of exchange rate risk. % % % %
Washington Co. and Vermont Co. have no domestic business. They have a similar dollar equivalent amount of international exporting business. Washington Co. exports all of its products to Canada. Vermont Co. exports its products to Poland and Mexico, with about half of its business in each of these two countries. Each firm receives the currency of the country where it sends its exports. You obtain the end-of-month spot exchange rates of the currencies mentioned above during the end of each of the last 6 months. POLISH END OF CANADIAN MONTH DOLLAR MEXICAN PESO ZLOTY 1 $0.8140 $0.09341 $0.29908 2 0.8178 0.09428 0.29832 3 0.8380 0.09230 0.30180 4 0.8548 0.09245 0.30880 5 6 0.8512 0.8574 0.09238 0.09469 0.30272 0.30320 You want to assess the data in a logical manner to determine which firm has a higher degree of exchange rate risk. Complete the table below and make your conclusion. (Hint: The percentage change in the portfolio of currencies is a weighted average of the percentage change in each currency in the portfolio.) Do not round intermediate calculations. Round your answers for standard deviation to four decimal places and for maximum expected loss to two decimal places. Standard deviation Canadian $ Maximum expected loss 1.65 x Std. Dev. Mexican peso Polish zloty Portfolio -Select- has a higher degree of exchange rate risk. % % % %
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Please help solve. Thank you.
Transcribed Image Text:Washington Co. and Vermont Co. have no domestic business. They have a similar dollar equivalent amount of international exporting business. Washington Co. exports all of its
products to Canada. Vermont Co. exports its products to Poland and Mexico, with about half of its business in each of these two countries. Each firm receives the currency of the
country where it sends its exports. You obtain the end-of-month spot exchange rates of the currencies mentioned above during the end of each of the last 6 months.
POLISH
END OF
CANADIAN
MONTH
DOLLAR
MEXICAN
PESO
ZLOTY
1
$0.8140
$0.09341
$0.29908
2
0.8178
0.09428
0.29832
3
0.8380
0.09230
0.30180
4
0.8548
0.09245
0.30880
5
6
0.8512
0.8574
0.09238
0.09469
0.30272
0.30320
You want to assess the data in a logical manner to determine which firm has a higher degree of exchange rate risk. Complete the table below and make your conclusion. (Hint: The
percentage change in the portfolio of currencies is a weighted average of the percentage change in each currency in the portfolio.) Do not round intermediate calculations. Round
your answers for standard deviation to four decimal places and for maximum expected loss to two decimal places.
Standard
deviation
Canadian $
Maximum expected
loss 1.65 x Std. Dev.
Mexican peso
Polish zloty
Portfolio
-Select-
has a higher degree of exchange rate risk.
%
%
%
%
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 2 steps
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education