Reference no: EM132515775
One or more of the questions in the exam might need the following information:
For a Standard Normal Distribution, we have:
z = 2.576 for cumulative probability of 0.995
z = 2.326 for cumulative probability of 0.990
z = 1.960 for cumulative probability of 0.975
z = 1.645 for cumulative probability of 0.950
z = 1.282 for cumulative probability of 0.900
Question 1. Suppose that a company's earnings in the next year is normally distributed with mean of $7.5 million and standard deviation of $9 million. What is the VaR for the company's earnings next year at 2.5% left tail (i.e., with 97.5% confidence level)?
A. -15.68 million
B. -13.43 million
C. -10.14 million
D. -9.00 million
E. -7.31 million
Question 2. Suppose that a company has a one-year project, and all outcomes from this project for next year are distributed equally likely between a loss of $85 million and a gain of $125 million. Which of the following is closest to the VaR for next year at a 99.5% confidence level (i.e., 0.5% left tail)?
A. -80.5 million
B. -82.9 million
C. -83.4 million
D. -84.2 million
E. None of the above
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