VAR Calculation A firm has a portfolio composed of stock A and B with normally distributed returns....

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Finance

VAR Calculation
A firm has a portfolio composed of stock A and B with normallydistributed returns. Stock A has an annual expected return of 15%and annual volatility of 20%. The firm has a position of $100million in stock A. Stock B has an annual expected return of 25%and an annual volatility of 30% as well. The firm has a position of$50 million in stock B. The correlation coefficient between thereturns of these two stocks is 0.3.
a.      Compute the 5% annual VAR for the portfolio. Interpret theresulting VAR.
b.      What is the 5% daily VAR for the portfolio? Assume 365 days peryear.
c.      If the firm sells $10 million of stock A and buys $10 million ofstock B, by how much does the 5% annual VAR change?

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a Compute the 5 annual VAR for the portfolio Interpret the resulting VAR Expected Return of the Portfolio1001550251005018333 Standard Deviation of the See Answer

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VAR CalculationA firm has a portfolio composed of stock A and B with normallydistributed returns. Stock A has an annual expected return of 15%and annual volatility of 20%. The firm has a position of $100million in stock A. Stock B has an annual expected return of 25%and an annual volatility of 30% as well. The firm has a position of$50 million in stock B. The correlation coefficient between thereturns of these two stocks is 0.3.a. Compute the 5% annual VAR for the portfolio. Interpret theresulting VAR.b. What is the 5% daily VAR for the portfolio? Assume 365 days peryear.c. If the firm sells $10 million of stock A and buys $10 million ofstock B, by how much does the 5% annual VAR change?