14. An investor has $2,000 invested in stock A and $5,000 in stock B. The daily volatilities of A and B are 1.5% and 1% respectively and the coefficient of correlation is 0.8. What is the one day 99% VaR? (Note that N(-2.33)=0.01)
A) $177
B) $135
C) $215
D) $331

Question

Quizplus · Accepted Answer

The portfolio variance is:(2000^2 * 0.015^2) + (5000^2 * 0.01^2) + 2 * 2000 * 5000 * 0.015 * 0.01 * 0.8 = 225The portfolio standard deviation is:sqrt(225) = 15The 99% VaR is:15 * (-2.33) = $177

14 an Investor Has $2,000 Invested in Stock a and $5,000