Question

an asset has normally-distributed returns, with mean of 9.6% and standard deviation of 14.8%. what is the 2% var (value at risk) return? enter answer in percents.

Answer 1

The 2% Value at Risk (VaR) return can be calculated using the mean and standard deviation of the asset's returns. In this case, the 2% VaR return is approximately -20.744%.

Step-by-step explanation:

The 2% Value at Risk (VaR) return can be calculated using the mean and standard deviation of the asset's returns. In this case, the mean return is 9.6% and the standard deviation is 14.8%. To find the 2% VaR, we need to find the return value that corresponds to the 2nd percentile of the normal distribution.

This can be done using a Z-test or by using a calculator or software that has the ability to calculate percentiles of a normal distribution.

Using a Z-test, we can calculate the Z-score corresponding to the 2nd percentile, which is approximately -2.05. This Z-score can be used to find the corresponding return value by multiplying it by the standard deviation and adding it to the mean. So, the 2% VaR return would be:

2% VaR return = Mean + (Z-score * Standard Deviation)

2% VaR return = 9.6% + (-2.05 * 14.8%)

2% VaR return ≈ 9.6% - 30.344% = -20.744%