Question: Please explain each step/formulas used. Please do not use excel or other programs. Thanks Problem 1. (10 points) Consider a market with only two risky

Please explain each step/formulas used. Please do not use excel or other programs. Thanks

Problem 1. (10 points) Consider a market with only two risky stocks A and B as follows Expected return Standard deviation of return Stock A 12% 12% Stock B 10% 9% Furthermore, the correlation coefficient between the returns of stocks A and B is . Suppose we have a $100,000 portfolio financed by a loan at zero interest rate, with 20% invested in A and 80% in B. Compute the yearly Value at Risk of the portfolio at the confidence level of 90%. Assume that the joint distribution of stock returns is normal. (Round your answer to the nearest integer)

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