The bank has invested in a portfolio consisting of two instruments; $ 15 million investment...

Name: The bank has invested in a portfolio consisting of two instr
Brand: StudyZin
Rating: 3.53 (75 reviews)

80.2K

Verified Solution

Question

Finance

The bank has invested in a portfolio consisting of two instruments; $ 15 million investment in the S&P 500 index and $ 12 million investment in U.S. government bonds. The government bond is expected to yield 7% and the standard deviation of the yield is 5%. The return on the S&P 500 index is expected to be 15% with a standard deviation of 20%. The correlation between bond yields and S&P 500 index returns is 0.40. All figures are expressed in annual values a) Calculate the VaR of the portfolio for one year with a 5% probability. b) Using the information in the previous section, which is the one-day VaR.

Answer & Explanation Solved by verified expert

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member