The distribution of daily return is assumed to be normally distributed with average return of RM2 million. Given the standard deviation is 0.5% per annum and the cutoff return is R'. (a) Estimate one year VaR at 99% confidence level if initial investment of RM10 million is made. Hence, find R*. (b) By using the 95% confidence level, estimate VaR over 5 years.

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The distribution of daily return is assumed to be normally distributed with
average return of RM2 million. Given the standard deviation is 0.5% per annum
and the cutoff return is R*.
(a) Estimate one year VaR at 99% confidence level if initial investment of
RM10 million is made. Hence, find R*.
(b) By using the 95% confidence level, estimate VaR over 5 years.
Transcribed Image Text:The distribution of daily return is assumed to be normally distributed with average return of RM2 million. Given the standard deviation is 0.5% per annum and the cutoff return is R*. (a) Estimate one year VaR at 99% confidence level if initial investment of RM10 million is made. Hence, find R*. (b) By using the 95% confidence level, estimate VaR over 5 years.
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