Suppose that the 90-day forward rate is $1.17/€, the current spot rate is $1.20/€, and you expect the future spot rate in 90 days to be $1.21/€. If the standard deviation of the 90-day rate of appreciation of the euro relative to the dollar is 2% (in terms of the current spot rate), what range covers 95.46% of your possible profits and losses (assume a normal distribution on the future spot rate)? O a. [-S0.032, SO.112] O b. [-S0.008, SO.088] O. [S0.023, $O.075] O d. [S0.016, S0.064]
Suppose that the 90-day forward rate is $1.17/€, the current spot rate is $1.20/€, and you expect the future spot rate in 90 days to be $1.21/€. If the standard deviation of the 90-day rate of appreciation of the euro relative to the dollar is 2% (in terms of the current spot rate), what range covers 95.46% of your possible profits and losses (assume a normal distribution on the future spot rate)? O a. [-S0.032, SO.112] O b. [-S0.008, SO.088] O. [S0.023, $O.075] O d. [S0.016, S0.064]
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![Suppose that the 90-day forward rate is $1.17/€, the current spot rate is S1.20/€, and you expect the future spot rate in 90 days to be S1.21/€. If
the standard deviation of the 90-day rate of appreciation of the euro relative to the dollar is 2% (in terms of the current spot rate), what range
covers 95.46% of your possible profits and losses (assume a normal distribution on the future spot rate)?
O a. [-S0.032, SO.112]
O b. [-S0.008, S0.0OSS]
O . [S0.023, S0.075]
O d. [S0.016, S0.064]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0637fe70-7f48-40df-b426-2d008ce45af8%2F55f536cb-3f9f-4b88-bf95-e315cf9767ad%2Ffrjjt2_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose that the 90-day forward rate is $1.17/€, the current spot rate is S1.20/€, and you expect the future spot rate in 90 days to be S1.21/€. If
the standard deviation of the 90-day rate of appreciation of the euro relative to the dollar is 2% (in terms of the current spot rate), what range
covers 95.46% of your possible profits and losses (assume a normal distribution on the future spot rate)?
O a. [-S0.032, SO.112]
O b. [-S0.008, S0.0OSS]
O . [S0.023, S0.075]
O d. [S0.016, S0.064]
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