Lion Star Inc. will receive 50 million Australian dollars (AUD) tomorrow. Current FX rate = $0.64/Euro....

Lion Star Inc. will receive 50 million Australian dollars (AUD) tomorrow. Current FX rate = $0.64/Euro. Standard deviation of daily percentage change of AUD is 0.76 % over the last 200 days. Assume normal distribution, and the expected % change in Euro is 0.15%. A) What is the maximum one-day loss (in % and in dollar amount) with 99% confidence level? B) What is the maximum one-day loss (in % and in dollar amount) with 95% confidence level?

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Expert Solution

The handwritten solution consists of both the parts that is A and B in an elaborate manner . Kindly refer to the same to conclude the concept of VaR has been used that is Value At Risk.

jeff jeffy answered 1 year ago

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