2016-FRR Exam Dumps | James Johnson has a $1 million long position in ThetaGroup with a VaR of 0.3 million, and $1 million

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GARP.2016-FRR.v2024-09-09.q145
Question 39

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Question 39/145

James Johnson has a $1 million long position in ThetaGroup with a VaR of 0.3 million, and $1 million long position in VolgaCorp with a VaR of 0.4 million. The returns of the two companies have zero correlation.
What is the portfolio VaR?

A. $1 million

B. $0.7 million

C. $0.5 million

D. $0.4 million

Correct Answer: C

The portfolio VaR when the returns of two assets are uncorrelated can be calculated using the formula:
Portfolio VaR=(VaR of ThetaGroup)2+(VaR of VolgaCorp)2Portfolio VaR=(VaR of ThetaGroup)2+(VaR of Vo Plugging in the values:
Portfolio VaR=(0.3)2+(0.4)2=0.09+0.16=0.25=0.5Portfolio VaR=(0.3)2+(0.4)2=0.09+0.16=0.25=0.5 So, the portfolio VaR is $0.5 million.

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