You Have Computed the Expected Return Using VaR with a 2.5

question 47

Multiple Choice

You have computed the expected return using VaR with a 2.5% probability for a 1-year period. How would this expected return be expressed on a normal distribution curve?

• A)lower tail starting at the point that is 2.5 standard deviations below the mean
• B)lower tail of a 95% probability range
• C)the point that corresponds to 2.5 standard deviations below the mean
• D)the point that represents the lower end of the 90% probability range
• E)the negative range that lies within 2.5 standard deviations of the mean

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Definitions:

Present Value Index

The Present Value Index is a financial metric used to evaluate the viability of a project or investment by comparing its present value of future cash flows to the initial investment.

Investment Proposals

Documents or presentations by a company or individual seeking to attract investors by outlining potential investment opportunities and expected returns.

Compound Interest

Interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan.

Cash Payback Period

The length of time required for an investment to generate cash flows sufficient to recover the initial outlay.