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Compute the VaR for this investment

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Q1) Suppose the gain from an investment is a normal random variable with mean $10 and standard deviation $1.25. Compute the VaR for this investment.

Q2) Define the c%-VaR to be the value |v| such that there is only a c% chance that the loss from an investment will be greater than c.

a) Derive a formula for 5%-VaR on an investment with gain G that is normally distributed with mean and standard deviation.

b) If G has mean =15 and =1.8, compute the 5%-VaR on this investment.

Q3) Investment A yields a gain that is normally distributed with mean 24 and standard deviation 4.5. Investment B yields a gain that is normally distributed with mean 23 and standard deviation 3.9. Which investment is better in terms of VaR?

Reference no: EM133026476

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