Which One of the Following Is the Primary Purpose of the Value-At-Risk

question 23

Multiple Choice

Which one of the following is the primary purpose of the Value-at-Risk computation?

• A) determine the 99 percent probability range given an abnormal distribution
• B) evaluate the risk-return tradeoff for a given mix of securities
• C) evaluate the probability of a significant loss
• D) determine the portfolio that maximizes the risk premium per unit of total risk
• E) determine the portfolio that maximizes the excess return per unit of systematic risk

Calculate the internal rate of return (IRR) for investments and understand its significance in investment decisions.

Integrate non-quantitative factors such as intangible benefits and salvage value in the evaluation of capital budgeting projects.

Distinguish between different capital budgeting evaluation techniques and their application contexts.

Understand the concept of working capital management in project evaluation.

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Definitions:

Total Cost

The sum of fixed and variable costs incurred by a firm in producing a certain level of output.

Pollution Reduction

Efforts or strategies aimed at decreasing the amount of pollutants released into the environment.

Government Caps

Limits set by the government on the amount of a commodity or service that can be produced, sold, or used.

Pollution Permits

Licenses issued by governments that allow the holder to emit a certain amount of pollutants over a given time period.