Answered: Based on a 90% confidence level, how…

Based on a 90% confidence level, how many exceptions in backtesting a VAR would be expected over a 250-day trading year? a. 10 b. 15 c. 25 d. 50

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter9: Forecasting Exchange Rates

Section: Chapter Questions

Problem 19QA

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Question

Based on a 90% confidence level, how many exceptions in backtesting a VAR would be expected over a 250-day trading year?

a. 10

b. 15

c. 25

d. 50

Continuing with the previous question, what is the annualized rate of return earned on a cash-and-carry trade entered into in March and closed out in June?

a. 9.8%

b. 8.9%

c. 39.1%

d. 35.7%

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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