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Calculate the maximum one-month loss in dollars

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Problem1 : Treck Co. expects to pay €300,000 in one month for its imports from Greece. It also expects to receive €400,000 for its exports to Italy in one month. Treck Co. estimates the standard deviation of monthly percentage changes of the euro to be 3 percent over the last 40 months. Assume that these percentage changes are normally distributed. Using the value-at-risk (VAR) method based on a 95% confidence level, calculate the maximum one-month loss in dollars if the expected percentage change of the euro during next month is -2%? Assume that the current spot rate of the euro (before considering the maximum one-month loss) is $1.28.

Reference no: EM132960827

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