Cerra co. expects to receive 5 million euros tomorrow as a result of selling goods to the netherlands. cerra estimates the standard deviation of daily percentage changes of the euro to be 1 percent over the last 100 days. assume that these percentage changes are normally distributed. use the value-at-risk (var) method based on a 95 percent confidence level. what is the maximum one-day loss in dollars if the expected percentage change of the euro tomorrow is 0.5 percent? the current spot rate of the euro (before considering the maximum one-day loss)

$58,075

Step-by-step explanation:

Given:

Expected amount to be received = 5 million euros

Standard deviation of daily percentage change of euros, σ = 1%

Confidence level = 95%

Expected percentage change of the euro tomorrow = 0.5 percent

let,

the current spot rate of the euro (before considering the maximum one-day loss = $1.01

Now,

The maximum one-day percentage loss

= Expected change of euro - 1.65 × σ                  

(here 1.65 is constant for 95% confidence)

= 0.5% - 1.65 × 1%

= -1.15%     (Here negative sign depicts the loss)

Therefore,

maximum one-day loss in dollars

= maximum one-day percentage loss × Exchange rate × Amount to be received

= -1.15% × $1.01 × 5 million euros

=  -0.0115 × 1.01 × 5,000,000

= -$58,075 (Here negative sign depicts the loss)

if you use photomath right away it will give you the answer not like this app that you have to wait for people.

side side side

side angle angle

angle side angle

side angle side

step-by-step explanation: