Which One of the Following Correctly States the VaR for a 3-Year

question 26

Multiple Choice

Which one of the following correctly states the VaR for a 3-year period with a 2.5 percent probability?

• A) Prob[R_p,T \(\le\) E(R_p) * 3 - 1.645 * \( \sigma\)_p \( \surd\)3]
• B) Prob[R_p,T \(\le\)E(R_p) * \( \surd\)3 - 1.645 * \(\sigma\)_p 3]
• C) Prob[R_p,T \(\le\) E(R_p) * \( \surd\)3 - 1.645 * \(\sigma\)_p \( \surd\)3]
• D) Prob[R_p,T \(\le\)E(R_p) * 3 - 1.960 * \(\sigma\)_p \( \surd\)3]
• E) Prob[R_p,T \(\le\) E(R_p) * \( \surd\)3 - 1.960 *\(\sigma\)_p 3]

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Definitions:

Monetary Policy

The process by which a central bank or monetary authority manages the money supply and interest rates to influence economic activity.

Federal Reserve Banks

Federal Reserve Banks are part of the central banking system in the United States, involved in regulating the nation's financial institutions and implementing monetary policy.

Excess Reserves

The amount of reserves held by banks over and above the regulatory requirements, indicating extra liquidity.

Money Supply

The collective amount of cash, coins, and checking and savings account balances representing monetary assets in an economy at a given time.