User Account

All Pages

Explain the meaning of the var

Assignment Help Finance Basics
Reference no: EM133062657

Assume you have a portfolio consisting of a $400,000 investment in stock A and a $600,000 investment in stock B. Suppose that the daily volatilities of these two assets are 2% and 1.5%, respectively, and that the coefficient of correlation between their returns is 0.7.

(a) What is the 5-day 97.5% Value at risk (VaR) for the portfolio?

(b) Briefly explain the meaning of the VaR you just calculated.

(c) By how much does diversification reduce the VaR?

For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).

Reference no: EM133062657

Questions Cloud

What is the current share price : A company expects to pay its first dividend of $1.50 a share in Year 6 with annual dividend increases of 2.8 percent thereafter.
What is the probability of barilaro stock return : Barilaro Ltd is a publicly listed company on the Australian Securities Exchange. Barilaro's annual stock returns are assumed to be normally distributed with a m
What are your monthly payments : You finance the purchase of a car in the amount of $8000. What are your monthly payments if the bank charges you 6.4% compounded monthly for 36 months
Explain the potential strategy : Suppose your firm invested in a callable bond recently when interest rates were high and the bond has three more years to go before the first call date.
Explain the meaning of the var : Assume you have a portfolio consisting of a $400,000 investment in stock A and a $600,000 investment in stock B.
Investing in real estate : As someone who is only in their second year of college, real estate investment isn't all too relevant to me at this moment, despite how interesting it is.
Biggest benefits in investments in reits : What are the biggest benefits in investments in REITs?
What is the consolidated balance for Land : Yelts owned land with a book value of $70,000 and a fair value of $100,000. What is the consolidated balance for Land and Bonds payable
What is the price-earnings ratio : A company pays out all its earnings as dividends. It will pay its next $2.50 per share dividend in a year.

Reviews

Write a Review

Finance Basics Questions & Answers

  Final estate and funeral costs

Ryan and Allison have 2 children ages 6 and 3. Ryans monthly take home pay is 3600 and Alisons is 4200. They wish to have $120,000 for their kids college fund (60,000 each). 210,000 in mortgage debt and 25,000 in credit card and installment ..

  What are information costs associated with financial assets

What are the information costs associated with financial assets?- Why do you think that for innovative financial products price discovery and liquidity could become impaired?

  Compute the effective interest rate

Assume that Cohort retired the bonds by purchasing them on the open market. Record the journal entry, and compare the gain or loss recognized on the retirement with the gain or loss computed in (c) above. Discuss.

  Available with regard to managing working capital

What types of strategies are available with regard to managing working capital? 250 words minimum

  What is global income

Suppose that in 2016, Global launches an aggressive marketing campaign that boosts sales by 14%. What is Global's income in 2016

  What is the value of the option to abandon the project

Now find the NPV of this project when taking the abandonment option into account.

  Process of opening a group retirement plan

Maritime Consolidated Inc. (MCI) is a small but growing manufacturing business that is in the process of opening a group retirement plan for the benefit

  Define correlation coefficient between the returns

A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 35%, while stock B has a standard deviation of return of 15%.

  An individual wishes to deposit a certain quantity of money

an individual wishes to deposit a certain quantity of money now so that he will have 500 at the end of 5 years.nbsp

  Why a cap can be valued as a portfolio

a) Explain why a cap can be valued as a portfolio of options on an interest rate.

  Explain why sunk costs should not be included in a capital

Explain why sunk costs should not be included in a capital budgeting analysis but opportunity costs and externalities should be included. Give an example of each.(briefly)

  What is the justification for exempting nonprofits

What is the justification for exempting nonprofits from paying local property taxes? Is there any long-term effect to the property tax base? If so, discuss.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd