Assume a bank has a stock portfolio worth $ 2 million with an expected annual volatility of 4%. What is the Value at Risk using a 95 level of confidence? Assume N=10 for holding the period. A $252,982.21 B $1,316,000.00 C $416,155.74 D $1,215,805.47
Assume a bank has a stock portfolio worth $ 2 million with an expected annual volatility of 4%. What is the Value at Risk using a 95 level of confidence? Assume N=10 for holding the period. A $252,982.21 B $1,316,000.00 C $416,155.74 D $1,215,805.47
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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Assume a bank has a stock portfolio worth $ 2 million with an expected annual volatility of 4%. What is the Value at Risk using a 95 level of confidence? Assume N=10 for holding the period.
A $252,982.21
B $1,316,000.00
C $416,155.74
D $1,215,805.47
Expert Solution

Given:
Here,
Value of Portfolio is $2,000,000
Expected Annual Volatility is 4%
Holding Period is 10 days
Confidence Interval Level is 95%
Here,
Z Score at 95% confidence interval will be 1.645 as per normal distribution table.
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