For a security with a daily standard deviation of 2%, calculate the 10-day VaR at the 95% confidence level. Assume expected daily returns to be nil.

For a security with a daily standard deviation of 2%, calculate the 10-day VaR at the 95% confidence level. Assume expected daily returns to be nil.
A . 0.02
B . 0.104
C . 0.1471
D . None of the above.

View Answer

Answer: B

Explanation:

If the daily standard deviation is 2%, the 10-day standard deviation will be 2%* 10 = 0.063245. The value of Z at the 95% confidence level is 1.64485. Therefore the VaR value is 1.64485 * 0.063245 = 10.4%. The other choices are incorrect.