For an NPV simulation,the value at risk (VAR)is typically defined as the:
A) 5th percentile of the NPV distribution
B) 10th percentile of the NPV distribution
C) 90th percentile of the NPV distribution
D) 95th percentile of the NPV distribution

Question

For an NPV simulation,the value at risk (VAR)is typically defined as the:
A) 5th percentile of the NPV distribution 
B) 10th percentile of the NPV distribution 
C) 90th percentile of the NPV distribution 
D) 95th percentile of the NPV distribution

Quizplus · Accepted Answer

The Value at Risk (VAR) in the context of an NPV simulation is typically defined as the 5th percentile of the NPV distribution. This means that there is a 5% chance that the NPV will be below this value, indicating a measure of the potential downside risk.

For an NPV Simulation,the Value at Risk (VAR)is Typically Defined