You have invested $3M in stock A with the expected annual returns of 10% and the...

You have invested $3M in stock A with the expected annual returns of 10% and the variance of return .0011.

a. What is 3%, one year VaR of your investment? [

b. What is 3%, three months VaR of your investment? [ ]

c. What is the probability that the annual return to your investment would fall below 4.5%? [ ]

Solutions

Expert Solution

1.
=3*(10%-1.88079*SQRT(0.0011))=0.11286 million=112863.75782 $

2.
=3*(10%*3/12-1.88079*SQRT(0.0011)*SQRT(3)/SQRT(12))=-0.01857 million=-18568.12109 $

3.
=NORMDIST(4.5%,10%,SQRT(0.0011),TRUE)=0.0486272142195016

jeff jeffy answered 2 years ago

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