Firm portfolio consists of assets with distributed returns

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Reference no: EM131891575

Suppose that your firm’s portfolio consists of three assets with normally distributed returns. The first asset has an annual expected return of 12 percent and an annual volatility of 15 percent. The firm has a long position of $43 million in that asset. The second asset has an annual expected return of 18 percent and an annual volatility of 27 percent. Your firm has a long position of $100 million in the second asset. The third asset has an annual expected return of 15% and the volatility of 20%. The firm has a short position of $50 million in that asset. The correlations between returns on these assets are given below: ASSET 1 2 3 1 1 2 0.3 1 3 0.27 0.4 1 a. b. Compute its 5 percent annual VaR.

Reference no: EM131891575

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