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(a) Find the value at risk (VaR) for an investment of $100,000 at 5%. (That is, find out how low the value of this investment could be if the worst 5% of outcomes are ruled out.) The investment is expected to grow during the year by 8% with SD 20%. Assume a normal model for the change in value. (b) To reduce the VaR to $12,000, how much more expected growth would be necessary? Assume that the SD of the growth remains 20%.

(a) Find the value at risk (VaR) for an investment of $100,000 at 5%. (That is, find out how low the value of this investment could be if the worst 5% of outcomes are ruled out.) The investment is expected to grow during the year by 8% with SD 20%. Assume a normal model for the change in value. (b) To reduce the VaR to $12,000, how much more expected growth would be necessary? Assume that the SD of the growth remains 20%.

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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(a) Find the value at risk (VaR) for an investment of $100,000 at 5%. (That is, find out how low the value of this investment could be if the worst 5% of outcomes are ruled out.) The investment is expected to grow during the year by 8% with SD 20%. Assume a normal model for the change in value. (b) To reduce the VaR to $12,000, how much more expected growth would be necessary? Assume that the SD of the growth remains 20%.
Transcribed Image Text:(a) Find the value at risk (VaR) for an investment of $100,000 at 5%. (That is, find out how low the value of this investment could be if the worst 5% of outcomes are ruled out.) The investment is expected to grow during the year by 8% with SD 20%. Assume a normal model for the change in value. (b) To reduce the VaR to $12,000, how much more expected growth would be necessary? Assume that the SD of the growth remains 20%.
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