A U.S. firm Biqing, Inc., expects to receive substantial payments in Indonesian rupiah and Thai baht in 1 month. Based on today’s spot rates, the dollar value of the funds to be received is estimated at $700,000 for the rupiah and $300,000 for the baht. Thus Biqing is exposed to a currency portfolio weighted 70% in rupiah and 30 % in baht. Based on data for the last 20 months, it estimates the standard deviation of monthly % changes to be 10% for the rupiah and 8% for the baht, and a correlation coefficient of 0.6 between the rupiah and baht. What is the portfolio’s standard deviation?

a. 8.656%

b. 7.921%

c. 7.002%

d. 8.189%

Answer rating: 100% (QA)

The detailed answer for the above question is provided below The correct answer is d ... View the full answer