A portfolio consists of $15 million of asset A (for which annual expected return is 10% and annual return volatility is 25%), $15 million of asset B (for which annual expected return is 15% and annual return volatility is 30%), and $20 million of asset C (for which annual expected return is 20% and annual return volatility is 35%). The return correlation between each pairing of assets A, B and C is 0.2. Assume the annual portfolio return is normally distributed. What is the 1-year 5% Value-at-Risk of the portfolio (i.e., there is a 5% probability that the portfolio will suffer a loss greater than what dollar value for the year)? a. $1.24 million b. $3.86 million c. $9.75 million d. $19.50 million e. None of the above
A portfolio consists of $15 million of asset A (for which annual expected return is 10% and annual return volatility is 25%), $15 million of asset B (for which annual expected return is 15% and annual return volatility is 30%), and $20 million of asset C (for which annual expected return is 20% and annual return volatility is 35%). The return correlation between each pairing of assets A, B and C is 0.2. Assume the annual portfolio return is normally distributed. What is the 1-year 5% Value-at-Risk of the portfolio (i.e., there is a 5% probability that the portfolio will suffer a loss greater than what dollar value for the year)? a. $1.24 million b. $3.86 million c. $9.75 million d. $19.50 million e. None of the above
ChapterP5: Part 5: Short-term Asset And Liability Management
Section: Chapter Questions
Problem 3Q
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A portfolio consists of $15 million of asset A (for which annual expected return is 10% and annual return volatility is 25%), $15 million of asset B (for which annual expected return is 15% and annual return volatility is 30%), and $20 million of asset C (for which annual expected return is 20% and annual return volatility is 35%). The return correlation between each pairing of assets A, B and C is 0.2. Assume the annual portfolio return is
What is the 1-year 5% Value-at-Risk of the portfolio (i.e., there is a 5% probability that the portfolio will suffer a loss greater than what dollar value for the year)?
a. |
$1.24 million |
|
b. |
$3.86 million |
|
c. |
$9.75 million |
|
d. |
$19.50 million |
|
e. |
None of the above |
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