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. END OF MONTH $0.8150 1111 CANADIAN DOLLAR MEXICAN POLISH PESO ZLOTY $0.09335 $0.29927 2 0.8184 0.09442 0.29843 3 0.09243 0.30170 4 0.8533 0.09256 0.30888 5 6 0.8494 0.8550 0.09264 0.09460 0.30289 0.30313 0.8385 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. -Select- Standard deviation Maximum expected loss = 1.65 × Std. Dev. % Canadian $ % % % has a higher degree of exchange rate risk. Mexican peso Polish zloty Portfolio
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. END OF MONTH $0.8150 1111 CANADIAN DOLLAR MEXICAN POLISH PESO ZLOTY $0.09335 $0.29927 2 0.8184 0.09442 0.29843 3 0.09243 0.30170 4 0.8533 0.09256 0.30888 5 6 0.8494 0.8550 0.09264 0.09460 0.30289 0.30313 0.8385 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. -Select- Standard deviation Maximum expected loss = 1.65 × Std. Dev. % Canadian $ % % % has a higher degree of exchange rate risk. Mexican peso Polish zloty Portfolio
Chapter9: Taxation Of International Transactions
Section: Chapter Questions
Problem 27P
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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.
END OF
MONTH
$0.8150
1111
CANADIAN
DOLLAR
MEXICAN
POLISH
PESO
ZLOTY
$0.09335
$0.29927
2
0.8184
0.09442
0.29843
3
0.09243
0.30170
4
0.8533
0.09256
0.30888
5
6
0.8494
0.8550
0.09264
0.09460
0.30289
0.30313
0.8385
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.
-Select-
Standard
deviation
Maximum expected
loss = 1.65 × Std. Dev.
%
Canadian $
%
%
%
has a higher degree of exchange rate risk.
Mexican peso
Polish zloty
Portfolio
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