QUESTION THREE A. Compute a 1-day Value at Risk for a bond investment portfolio of K10 million
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QUESTION THREE
A.Compute a 1-day Value at Risk for a bond investment portfolio of K10 million in a long position assuming a 95% confidence interval if the actual daily standard deviation of the portfolio over one year is 3.67%. Using the information above, compute the value at risk of a 1-month (30 days) for the investment holding all factors constant.
B.James has estimated an annual standard deviation of K750, 000 on one of its projects, based on a normal distribution of returns. The average annual return is K2, 400,000. Estimate the value at risk (VAR) at a 95% confidence level for one year and over the project's life of six years.
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