Which of the Following Is the Interpretation of a VAR

question 47

Multiple Choice

Which of the following is the interpretation of a VAR of $5 million for one year at 5 percent probability.

• A)the probability is 5 percent that the firm will lose at least $5 million in one year
• B)the probability is at least 5 percent that the firm will lose $5 million in one year
• C)the probability is 5 percent that the firm will lose $5 million in one year
• D)the probability is less than 5 percent that the firm will lose $5 million in one year
• E)none of the above

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Definitions:

Quantifiable

Capable of being measured or expressed as a quantity, enabling numerical assessment or comparison.

System II

A term often used in psychology to describe the deliberative, analytical form of cognition that requires concentration and is slower than intuitive thinking.

Intuitive Thinking

A cognitive process that involves making judgments and solving problems based on implicit knowledge and feelings, rather than explicit reasoning.

Reasoning

The mental process of generating conclusions, judgments, or inferences from facts or premises.