You Have Computed the Expected Return Using VaR with a 2.5

question 22

Multiple Choice

You have computed the expected return using VaR with a 2.5 percent probability for a one-year period of time.How would this expected return be expressed on a normal distribution curve?

• A) lower tail starting at the point that is 2.5 standard deviations below the mean
• B) lower tail of a 95 percent probability range
• C) the point that corresponds to 2.5 standard deviations below the mean
• D) the point that represents the lower end of the 90 percent probability range
• E) the negative range that lies within 2.5 standard deviations of the mean

---

Definitions:

Reserve Ratio

The fraction of deposits that a bank holds as reserves, either in its own vaults or at the central bank, affecting the bank's capacity to issue new loans.

Money Supply

The sum of all financial resources in the form of cash, coins, and bank account balances present in an economy at a certain time.

Tight Money Policy

A monetary policy strategy used by central banks to slow economic growth by increasing interest rates and reducing the supply of money.

Government Bonds

Fixed-income securities issued by a government to support government spending, typically offering a regular interest payment and repayment of the principal at maturity.