KIC000044 - - '---------------------------.- .16- j f ' \ /...

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Unformatted text preview: - '---------------------------.- .16- j f ' \ / ' ~, rr~ ;:]w' 2 w +~~-::l25-~- - - J .ZJ5 a_ 0 0 .Q t.!- , \ D...,-;;.. .. \26 5 - D D ( ) ..- \ l..\ '2. :2.5 () b .~ a v G C wu j;;. ..-5 ((0 ........- 1 I. Ifl. I j r , i i l'- ... IL"'"-------------------------------------------------~ Finance 320 Problem Set #6 1. Which two parameters completely specify a normal distribution? If the returns on a portfolio are normally distributed, then the following simple equation may be used to compute Value at Risk: VaR = zoW Explain what each of these three variables represents. 2. Your portfolio has a mean return of 15% and a standard deviation of 25%. What portfolio return is two standard deviations below the mean? 3. What are the probabilities that a normal random variable is further than z standard deviations below its mean for values of z equal to 1.28, 1.65, 1.96, and 2.33? 4. Explain the meaning of Value at Risk in terms of expected loss and the probability of such a loss....
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KIC000044 - - '---------------------------.- .16- j f ' \ /...

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