Sumitomo Bank's Risk Manager Has Estimated That the DEARs of Two

question 106

Multiple Choice

Sumitomo Bank's risk manager has estimated that the DEARs of two of its major assets in its trading portfolio, foreign exchange and bonds, are -$150,000 and -$250,000, respectively. What is the 10-day VAR of Sumitomo's trading portfolio if the correlation among assets is assumed to be -1.0?

• A)-$100,000.
• B)-$316,228.
• C)-$1,106,797.
• D)-$1,204,161.
• E)-$1,264,911.

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Definitions:

Disposable Income

Resources meant for household spending and saving once income tax obligations are settled.

APC

The average propensity to consume, which is the fraction of total income that is spent on consumption as opposed to being saved.

Saving

The portion of income not spent on consumption, often set aside for future investments or expenditures.

Disposable Income

The amount of money individuals or households have available to spend or save after taxes have been accounted for.