The expected percentage change of the euro

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Reference no: EM132061591

Jensen Co. expects to pay € 50,000 in one month for its import from France. It also expects to receive $ 200,000 for its export to Belgium in one month. Jensen estimates the standard deviation of monthly percentage changes of the euro to be 2.5 percent over the last 50 months. Assume that these percentage changes are normally distributed. Using the value-at-risk (VAR) method based on 97.5% confidence level, alpha 1.96, what is the maximum one month loss in dollars if the expected percentage change of the euro during next month is 2%? Assume that current sport rate of the euro (before considering the maximum one-month loss) is $ 1.35.

Reference no: EM132061591

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