An analyst predicts that at the 95% confidence level a bank could lose 7% of its asset value.Given assets of $30 million,what is the value at risk?

Question

Quizplus · Accepted Answer

At a 95% confidence level, the bank could lose up to 7% of its asset value. This means that there is a 5% chance that the bank will not experience losses beyond 7%.

To calculate the value at risk, we need to multiply the assets by the percentage loss:

Value at Risk = Asset Value x Percentage Loss 
Value at Risk = $30 million x 0.07 
Value at Risk = $2.1 million

Therefore, the answer is A) $2.1 million as this is the value at risk at a 95% confidence level.

An Analyst Predicts That at the 95% Confidence Level a Bank