Purchase Solution

Assessing Currency Volatility

Not what you're looking for?

Ask Custom Question

Zemart is a U.S. firm that plans to establish international business in which it will export to Mexico (these exports will be denomiated in Pesos) and to Canada (these exports will be denominated in Canadian dollars) once a month and will therefore receive payments once a month. It is concerned about exchange rate risk. It wants to compare the standard deviation of exchange rate movements of these two currencies against the U.S. dollar on a monthly basis. For this reason, it asks you:

a) Estimate the standard deviation of the monthly movements in the Canadian dollar against the U.S. dollar over the last 12 months.

b) Estimate the standard deviation of the monthly movements in the Mexican peso against the U.S. dollar over the last 12 months.

c) Determine which currency is less volatile.

You can use the oanda.com website, or any legitimate site that has currency data, to obtain the end of month direct exchange rate of the peso and the Canadian dollar in order to complete the analysis. Please use Excel.

Purchase this Solution

Solution Summary

Estimates the standard deviation of the monthly movements in the Mexican peso against the U.S. dollar and the standard deviation of the monthly movements in the Canadian dollar against the U.S. dollar.

Solution Preview

Please also see the attached Excel File

Zemart is a U.S. firm that plans to establish international business in which it will export to Mexico (these exports will be denominated in Pesos) and to Canada (these exports will be denominated in Canadian dollars) once a month and will therefore receive payments once a month. It is concerned about exchange rate risk. It wants to compare the standard deviation of exchange rate movements of these two currencies against the U.S. dollar on a monthly basis. For this reason, it asks you:

a) Estimate the standard deviation of the monthly movements in the Canadian dollar against the U.S. dollar over the last 12 months.

Canadian Dollar (CAD) ...

Purchase this Solution


Free BrainMass Quizzes
Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Operations Management

This quiz tests a student's knowledge about Operations Management

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.