An investment manager is assessing the value at risk (VaR) of a portfolio, Fund ZZ. The...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
An investment manager is assessing the value at risk (VaR) of a portfolio, Fund ZZ. The portfolio consists of two assets: A and B. The value of the portfolio is R12 million, with 25% invested in Asset A and 75% invested in Asset B. The standard deviation of expected returns on Asset A is 20%, and 15% on Asset B. The correlation coefficient between the two assets is -0.12. Hint: show all calculations when answering the following questions. Round off your final answers to two (2) decimal places. 4.1 4.2 4.3 Calculate and interpret the VaR for Fund ZZ at a 95% confidence level. (4) Calculate the component VaR for Asset B at a 95% confidence level. (3) Calculate and interpret the marginal VaR for Asset B at a 95% confidencelevel. (2) An investment manager is assessing the value at risk (VaR) of a portfolio, Fund ZZ. The portfolio consists of two assets: A and B. The value of the portfolio is R12 million, with 25% invested in Asset A and 75% invested in Asset B. The standard deviation of expected returns on Asset A is 20%, and 15% on Asset B. The correlation coefficient between the two assets is -0.12. Hint: show all calculations when answering the following questions. Round off your final answers to two (2) decimal places. 4.1 4.2 4.3 Calculate and interpret the VaR for Fund ZZ at a 95% confidence level. (4) Calculate the component VaR for Asset B at a 95% confidence level. (3) Calculate and interpret the marginal VaR for Asset B at a 95% confidencelevel. (2)
Expert Answer:
Answer rating: 100% (QA)
SOLUTION 41 To calculate the VaR for Fund ZZ at a 95 confidence level we can use the following formula VaR portfolio value x zscore x portfolio standa... View the full answer
Related Book For
Statistics For Business Decision Making And Analysis
ISBN: 9780321890269
2nd Edition
Authors: Robert Stine, Dean Foster
Posted Date:
Students also viewed these accounting questions
-
1: Fill in the need row for each process. PO P1 P2 Allocation ABC 021 100 201 020 112 Max ABC 641 222 813 334 122 Available ABC 442 P3 P4 Activity 2: Draw a resource allocation graph for the system....
-
A banker manages a 1 million stock portfolio with a 1-day volatility of 0.2 and 1-day mean return of 0. The banker calculated a Value of Risk of 0.4653, but forgot whether he/she calculated the Value...
-
Value at Risk VaR is a measure that attempts to capture the risk within a firm or investment portfolio One way of calculating VaR assumes that daily returns are distributed according to a Normal...
-
Given the project network that follows, compute the early, late, and slack times for the project. Be sure to show the early finish and late start times on yournetwork. 20 15 25 10 10 Slack IS B
-
Draw resonance structures of the intermediate carbocations in the bromination of naphthalene, and account for the fact that naphthalene undergoes electrophilic substitution at C1 rather than C2. Br...
-
Last year during the week of July 4th, Murrysville Regional Hospital reported that they treated 264 patients for fireworks-related injuries.
-
The following contingency table presents observed frequencies. a. Compute the expected frequencies. b. One of the observed frequencies is less than 5. Is it appropriate to perform a test of...
-
Bordner Company manufactures HVAC (heating, ventilation, and air conditioning) systems for commercial buildings. For each new design, Bordner faces a 90 percent learning rate. On average, the first...
-
Define the points P(1,3) and Q(3, 4). Carry out the following calculation. Find two vectors parallel to QP with length 4.
-
Although the company has already established medical and retirement plan benefits, Toni Prevosti wants to consider other benefits to attract employees. As the companys accountant, you have been...
-
Background: Businesses take inventory of items for sale for several reasons. For income tax reporting. Inventory is needed to calculate cost of goods sold on a business tax form. Inventory costs...
-
Write a public instance (not static) method called testVal) in TestUtil.java that returns an int. This method must take a single String parameter. This method will possibly throw 3 Exceptions based...
-
In 1975, interest rates were 7.85% and the rate of inflation was 12.3% in the United States. What was the real interest rate in 1975? How would the purchasing power of your savings have changed over...
-
Mainline Produce Corporation acquired all the outstanding common stock of Iceberg Lettuce Corporation for $30,000,000 in cash. The book values and fair values of Iceberg's assets and liabilities were...
-
Determine the present value now of an investment of $3,000 made one year from now and an additional $3,000 made two years from now if the annual discount rate is 4%. 11) What is the present value of...
-
Your nursing home defines output as a patient day. Its present volume is 26,000 patient days. The average cost per day is $90.00. Present revenues and costs are presented below: Charge Patients...
-
Problem 1 Convert the following for loop into an equivalent while loop: 1 2 3 for (int i = 0; i < 5; i++) { } cout < < "Iteration " < < i < < endl; Sample of run: 1 Iteration 0 2 Iteration 1 3...
-
Write the expression in radical notation. Then evaluate the expression when the result is an integer. 23 -1/2
-
1. If managers believe that costs for both fuels tend to rise and fall together, then they should model X and Y as independent. 2. A negative covariance between X and Y would increase the uncertainty...
-
A friend of yours took a multiple-choice quiz and got all six questions right, but now claims to have guessed on every question. If each question offers four possible answers, do you believe her?...
-
A basketball team is down by 2 points with only a few seconds remaining in the game. Theres a 50% chance that the team will be able to make a 2-point shot and tie the game, compared to a 30% chance...
-
Assume you are working on a project to improve customer service. Create a Pareto chart based on the information in the following table. Use the Pareto chart template from the companion website or...
-
Brainstorm two different quality related problems that you are aware of at your college or organization. Then review the charts found in the section of this chapter on the seven basic tools of...
-
Updating processes, policies, procedures, and knowledge bases is part of __________. A. updating organizational process assets B. archival C. updating project documents D. lessons learned
Study smarter with the SolutionInn App