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

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Definitions:

S&P 500 Index

A stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States, often used as a benchmark for the overall market.

Risk-Adjusted Return

A measure of the return on an investment relative to the risk taken, often used to compare the performance of investment options.

Sharpe Measure

An alternative term for the Sharpe Ratio, providing an assessment of an investment's risk-adjusted return by calculating the excess return per unit of risk.

Beta

A tool for appraising the degree of volatility or systemic risk involved in a security or portfolio relative to the market at large.