Which One of the Following Is the Best Interpretation of This

question 16

Multiple Choice

Which one of the following is the best interpretation of this VaR statistic: Prob (Rp $\le$ - .15) = 37%?

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

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Definitions:

Incurable

Describing a disease or condition that cannot be cured or adequately treated and is likely to end in death or a permanent dysfunction.

Controlled Substance Act

The statute prescribing federal U.S. drug policy under which the manufacture, importation, possession, use, and distribution of certain substances are regulated.

Medical Use

The application of drugs or treatments by healthcare professionals to address specific medical conditions.

Potential for Abuse

The likelihood or risk associated with a substance or behavior to be misused in a way that is harmful to the individual or society.