Which One of the Following Is the Best Interpretation of This

question 45

Multiple Choice

Which one of the following is the best interpretation of this VaR statistic: Prob (R_p ≤ − .15) = 37%?

• A)If your portfolio declines by 15% or more, then that decline is expected to be followed by a 37% increase in value.
• B)Your portfolio is expected to lose at least 15%, but not more than 37%, in any given year.
• C)There is a 37% chance that your portfolio will decline in value by at least 15% over the next year.
• D)Sometime in the future, your portfolio is expected to lose 15% or more in a single year, but have an overall average rate of return of 37%.
• E)There is a 37% chance that your portfolio will lose at least 15% of its value over the next 10 years.

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Definitions:

Accounting Period

A specific duration of time used for financial reporting, usually quarterly or annually.

Supplies Expense

Supplies expense is the cost of consumable items used during the operating cycle of a business, such as office supplies, which are expensed as they are consumed.

Adjusting Journal Entry

Adjustments made in the financial books at the period's end to accurately distribute profits and costs to the period they belong.

Net Income

The amount of money that remains after all operating expenses, interest, taxes, and preferred stock dividends have been deducted from a company's total revenue.