Suppose That the Mean Change in the Treasury Bill Yield

question 26

Multiple Choice

Suppose that the mean change in the Treasury bill yield over the next month is 0 basis points with a standard deviation of 0.50. The duration for the Treasury bills is 6 months or 0.50 years and the bank holds $10,000,000 in Treasury bills The Treasury bills have an APR of 7.0 (3.5% for six months) . Based on this information, what is the VaR with a 99% confidence level?

• A) $ 39,731
• B) $ 56,192
• C) $ 79,462
• D) $112,384

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Definitions:

Inefficient Levels

Situations where resources are not being used in the best possible way from an economic perspective, leading to potential waste or losses.

Opportunity Cost

Foregoing the prospective advantages from various other alternatives by making a single selection.

Opportunity Cost

The expense related to overlooking the next in line preferable option in the course of decision-making.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, effectively representing the benefits you miss out on choosing one option over another.