(a) Find the value at risk (VaR) for an investment of $100,000 at 4%. (That is, find out how low the value of this investment could be if the worst 4% of outcomes are ruled out.) The investment is expected to grow during the year by 12% with SD 24%. Assume a normal model forthe change in value.(b) To reduce the VaR to $17,000, how much more expected growth would be necessary? Assume that the SD of the growth remains 24%.(a) The value at risk (VaR) for an investment of $100,000 at 4% is $(Round to the nearest thousand dollars as needed.)

VaR offers a numerical representation of risk, enabling financial institutions and investors to…

(a) Find the value at risk (VaR) for an investment of $100,000 at 4%. (That is, find out how low the value of this investment could be if the worst 4% of outcomes are ruled out.) The investment is expected to grow during the year by 12% with SD 24%. Assume a normal model e change in value. (b) To reduce the VaR to $17,000, how much more expected growth would be necessary? Assume that the SD of the growth remains 24%. (a) The value at risk (VaR) for an investment of $100,000 at 4% is $ (Round to the nearest thousand dollars as needed.)

(a) Find the value at risk (VaR) for an investment of $100,000 at 4%. (That is, find out how low the value of this investment could be if the worst 4% of outcomes are ruled out.) The investment is expected to grow during the year by 12% with SD 24%. Assume a normal model e change in value. (b) To reduce the VaR to $17,000, how much more expected growth would be necessary? Assume that the SD of the growth remains 24%. (a) The value at risk (VaR) for an investment of $100,000 at 4% is $ (Round to the nearest thousand dollars as needed.)

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 you have a project that has a 0.6 chance of doubling your investment in a year and a 0.4 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) Answer is complete but not entirely correct. 40.99 Standard deviation %
Adam Andler Corp is analyzing an average-risk project, and the following data have been developed. Unit sales will be constant, but the sales price should increase with inflation. Fixed costs will also be constant, but variable costs should rise with inflation. The project should last for 3 years. This is just one of many projects for the firm, so any losses on this project can be used to offset gains on other firm projects. What is the project's expected NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC or cost of capital Net investment cost (depreciable basis) The salvage value of its equipment No other fixed assets will be acquired for following years The company will require an increase in net working capital at the $10,000 beginning The company will liquidate all working capital at the end of the project -10,000 Units sold (constant through years) 60,000 $30.00 $50,000 $17.00 Average price per unit, Year 1 Fixed operating…
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1
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