4 Choice Bank's stock portfolio has a marketvalue of $500 million. The beta of theportfolio approximates the market portfolio,whose standard deviation (sm) has beenestimated at 2.25 per cent. What is the five-day ES of this portfolio using adverse ratechanges in the 99th percentile?

In this we have to calculate VaR of the portfolio.

alue of $500 million. The beta of the ortfolio approximates the market portfolio, hose standard deviation (Sm) has been stimated at 2.25 per cent. What is the five- ay ES of this portfolio using adverse rate nanges in the 99th percentile?

alue of $500 million. The beta of the ortfolio approximates the market portfolio, hose standard deviation (Sm) has been stimated at 2.25 per cent. What is the five- ay ES of this portfolio using adverse rate nanges in the 99th percentile?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 3P

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Concept explainers

Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.

Question

Choice Bank's stock portfolio has a market
value of $500 million. The beta of the
portfolio approximates the market portfolio,
whose standard deviation (sm) has been
estimated at 2.25 per cent. What is the five-
day ES of this portfolio using adverse rate
changes in the 99th percentile?

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