Multiple Choice
Consider an MNC that is exposed to the Taiwan dollar (TWD) and the Egyptian pound (EGP) ; 25 percent of the MNC's funds are Taiwan dollars and 75 percent are pounds. The standard deviation of exchange movements is 7 percent for Taiwan dollars and 5 percent for pounds. The correlation coefficient between movements in the value of the Taiwan dollar and the pound is .7. Based on this information, the standard deviation of this two-currency portfolio is approximately:
A) 5.13 percent.
B) 2.63 percent.
C) 4.33 percent.
D) 5.55 percent.
Correct Answer:
Verified
Correct Answer:
Verified
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