Question: You work for a U.S. based company that is exposed to the Taiwan dollar (TWD) and the Polish zloty (PLN); 50% of your companys net

You work for a U.S. based company that is exposed to the Taiwan dollar (TWD) and the Polish zloty (PLN); 50% of your companys net cash inflows are in TWD and 50% are in PLN. You estimate that the standard deviation of monthly percentage changes is 4% for the TWD and 3% for the PLN. You also estimate that the correlation between the monthly percentage changes of these two currencies is 0%. Compute the monthly standard deviation of this two-currency portfolio. Express your answer in percentage terms to one decimal place (e.g., 1.1%).

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