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Derive the maximum expected decline in the gbp

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Reference no: EM133069608

Assume that you work for a U.S. ?rm that conducts most of its international business in England and has cash in?ows in pounds (GBP). The current GBP spot rate is $1 .3081. Three months ago, the GBP was trading at $1.4212, two months ago it was trading at 331.4439 and last month it was trading at $13523. Your firm uses the current GBP spot rate as its forecast for the spot rate next month. Your ?rm wants you to determine the maximum expected percentage decline in the value of the GBP in one month based on the value at risk (VaR) method and a 95 percent probability. Use the information provided to derive the maximum expected decline in the GBP (in percentage terms) over the next month.

Reference no: EM133069608

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