8008 Exam Dumps | For a security with a daily standard deviation of 2%, calculate the 10-day VaR at the 95% confidence

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PRM Certification - Exam III: Risk Management Frameworks, Operational Risk, Credit Risk, Counterparty Risk, Market Risk, ALM, FTP - 2015 Edition
PRMIA.8008.v2021-08-28.q125
Question 9

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Question 9/125

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.

Correct 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.

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