Question: Press Teag Worldwide (PTW) has investments around the world that generate revenue in the British pound, the New Zealand kiwi, and the japanese yen. At the end of each quarter, PTW converts the revenue from these three international operations back into U.S. dollars, exposing PTW to exchange rate risk. The current exchange rates are US$1.60 per £1, US$0.82 per NZD$1, and US$0.01 per ¥1. PTW wants to construct a simulation model to assess its vulnerability to uncertain exchange rate fluctuations. The quarterly revenues generated in British pounds, New Zealand kiwis, and japanese yen are £100,000, NZD$250,000, and ¥10,000,000, respectively.

a. If exchange rates stay at their current values, what is the total quarterly revenue in U.S. dollars?

b. Following the instructions in Appendix 11.1, model the uncertainty in the quarterly changes of the exchange rates between U.S. dollars and British pounds, New Zealand kiwis, and japanese yen using a SLURP.

c. Use your simulation model to estimate the average total quarterly revenue in U.S. dollars. What is the probability that the total quarterly revenue will be lower than the answer in part a?