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You have a portfolio with two bonds worth $100 each. Each bond has a 4% probability...

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Basic Math

You have a portfolio with two bonds worth $100 each. Each bondhas a 4% probability of defaulting. If the bond defaults it isworth $0. If it does not default it is worth $100. Defaults areindependent of each other. What is the 95% VaR of each bond, and ofthe portfolio?

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