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:

Small Effect

A situation where the observed changes or differences due to manipulation or intervention are minimal.

Sustainable Growth Rate

The maximum rate at which a company can grow its revenues without needing to increase its financial leverage.

Shareholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing the owners' claim on the business.

Net Income

The total profit of a company after all expenses and taxes have been deducted from gross income.