Assuming that the inter-affiliate cash flows are uncorrelated with one another,calculate the standard deviation of the portfolio of cash held by the centralized depository for the following affiliate members: (Round your final answer to nearest whole dollar) $$\begin{array} { l c c }
\text { Affiliate } & \begin{array} { c }
\text { Expected } \
\text { Transactions }
\end{array} & \begin{array} { c }
\text { Standard } \
\text { Deviation }
\end{array} \
\hline \text { U.S. } & \$ 100,000 & \$ 40,000 \
\text { Canada } & \$ 150,000 & \$ 60,000 \
\text { Mexico } & \$ 175,000 & \$ 30,000 \
\text { Chile } & \$ 200,000 & \$ 70,000
\end{array}$$

Question

Assuming that the inter-affiliate cash flows are uncorrelated with one another,calculate the standard deviation of the portfolio of cash held by the centralized depository for the following affiliate members: (Round your final answer to nearest whole dollar) $$\begin{array} { l c c } 
\text { Affiliate } & \begin{array} { c } 
\text { Expected } \
\text { Transactions }
\end{array} & \begin{array} { c } 
\text { Standard } \
\text { Deviation }
\end{array} \
\hline \text { U.S. } & \$ 100,000 & \$ 40,000 \
\text { Canada } & \$ 150,000 & \$ 60,000 \
\text { Mexico } & \$ 175,000 & \$ 30,000 \
\text { Chile } & \$ 200,000 & \$ 70,000
\end{array}$$

Quizplus · Accepted Answer

The standard deviation of a portfolio with uncorrelated cash flows is calculated using the square root of the sum of the variances of each affiliate. The variances are: U.S. = 1,600,000,000; Canada = 3,600,000,000; Mexico = 900,000,000; Chile = 4,900,000,000. The total variance is 11,000,000,000, and the standard deviation is the square root of this, which is approximately 104,881.

Assuming That the Inter-Affiliate Cash Flows Are Uncorrelated with One