VAR Quiz 3

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Joined: Wed May 02, 2012 10:15 am

VAR Quiz 3

Postby abhishek.mokal » Fri May 04, 2012 11:26 am

The Westover Fund is a portfolio consisting of 42% fixed-income investments and 58% equity investments. The manager of the Westover Fund recently estimated that the annual VAR (5%), assuming a 250-day year, for the entire portfolio was $1,367,000 based on the portfolio's market value of $12,428,000 and a correlation coefficient between stocks and bonds of zero. If the annual loss in the equity position is only expected to exceed $1,153,000; 5% of the time, then the daily expected loss in the bond position that will be exceeded 5% of the time is closest to:

Choose one answer.
a. $72 623
b. $46,445.
c. $21,163.
d. $55,171.

Pristine answer is $46,445.

Could you please explain how we got the answer ?


Finance Junkie
Posts: 356
Joined: Wed Apr 11, 2012 11:26 am

Re: VAR Quiz 3

Postby content.pristine » Mon May 07, 2012 11:05 am


Looks like quiet a few of you had doubts on this question..
I've posted the reply at:

Take a look 8-)

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