An MNC is exposed to the Taiwan dollar (TWD) and the Egyptia…
An MNC is exposed to the Taiwan dollar (TWD) and the Egyptian pound (EGP); 60 percent of the MNC’s funds are Taiwan dollars and 40 percent are pounds. The standard deviation of exchange movements is 6 percent for Taiwan dollars and 8 percent for pounds. The correlation coefficient between movements in the value of the Taiwan dollar and the pound is 0.45. Based on this information, the standard deviation of this two-currency portfolio is approximately: