# Question

(a) Find the value at risk (VaR) for an investment of $100,000 at 2%. (That is, find out how low the value of this investment could be if we rule out the worst 2% of outcomes.) 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 $20,000, how much more expected growth would be necessary? Assume that the SD of the growth remains 20%.

(c) If the VaR of an investment is $20,000 for a one-year holding period, does that mean that the VaR for a two-year holding period is $40,000?

(b) To reduce the VaR to $20,000, how much more expected growth would be necessary? Assume that the SD of the growth remains 20%.

(c) If the VaR of an investment is $20,000 for a one-year holding period, does that mean that the VaR for a two-year holding period is $40,000?

## Answer to relevant Questions

(a) Find the VaR for an investment of $500,000 at 1%. (That is, find out how low the value of this investment could be if we rule out the worst 1% of outcomes.) The investment is expected to grow during the year by 10% with ...The data give the market share (0 to 100%) of a brand-name pharmaceutical product in 224 metropolitan locations. The market share indicates the percentage of all prescriptions for this type of medication that are written for ...A company packaging snack foods maintains quality control by randomly selecting 10 cases from each day’s production. Each case contains 50 bags. An inspector selects and weighs two bags from each case. Print a blank 50 × 15 spreadsheet on construction paper, and then cut the printed cells into 25 rectangles of varying size, some with just a few cells and some with many. Ask a few friends to pick a sample of 5 pieces from ...A monitoring system records the production of an assembly line each hour. The design calls for output to be four units per hour. Current policy calls for stopping the line to check for flaws if fewer than two items are ...Post your question

0