Given ten historical returns: [-15%, -13%, -10%, -5%, -3%, 1%, 4%, 7%, 11%, 20%], what is the 20% conditional value at risk (CVaR) under the empirical distribution? Select one: a. -15% b. -14% c. -13% d. -10% e. 11%
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Given ten historical returns: [-15%, -13%, -10%, -5%, -3%, 1%, 4%, 7%, 11%, 20%], what is the 20% conditional value at risk (CVaR) under the empirical distribution?
Select one:
a. -15%
b. -14%
c. -13%
d. -10%
e. 11%
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- “Risk-averse investor will never assume risk” - would you agree? Justify your stand. Also, explain the components of return of investment.Question content area Part 1 The potential market represents all active duty military members, allveterans, and their families. Assume that according to the United States Department of Defense, as ofDecember 31, last year there were 1 comma 361 comma 597 active duty personnel in all armed services.The veteran population totaled 21 million last year. Assuming the average cost of life insurance is $750 peryear and that potential customers purchase one policy per year, use the chain ratio method to calculatethe market potential for life insurance in the military market. Hint: see the Market Potential and SalesEstimates section of Appendix 3 Marketing by the Numbers in your textbook. Part 2 The number of buyersin the market can be estimated as 22,361, 597. (Round to the nearest whole number.) Part 3 Themarket demand is estimated as $16.77 million. (Round to the nearest whole number.)5) Factoring in the market price of oil (as a random event, depicted by a circle) to determine revenues. Planners might use a continuous random variable, like a normal distribution with a known mean and standard deviation. They also might use a limited set of discrete values to approximate a continuous random variable. For this example, we'll assume that, for the expected distribution of oil prices, the planners would select an extraction option giving an expected payoff of $120M. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
- How would the price of the bond be affected by changing the going market interest rate? (Hint: Conduct a sensitivity analysis of price to changes in the going market interest rate for the bond. Assume that the bond will be called if and only if the going rate of interest falls below the coupon rate. That is an oversimplification, but assume it anyway for purposes of this problem.)The application which provides a way of revising conditional probabilities by using available information and provisions for revising conditional probabilities with other information that is useful for management decision making is called? Select one: a. Bayes’ theorem. b. overinvolvement ratios. c. probability rules. d. empirical formula.Millicent’s utility function is U(w) = W0.5 , where W is her wealth. She owns a “pure water” producing firm that will be worth GH100 or 0 Ghana cedis next year with equal probability. a. Suppose her firm is the only asset she has. What is the lowest price at which she will agree to sell her pure water? (Hint: price=amount that will give her the same expected utility) b. Assume that she has GH200 safely stored under her mattress, find the new lowest price at which she will agree to sell her “pure water” producing firm c. From your answers in parts (a) and (b), what is the relationship between her wealth and her degree of risk aversion?
- D3) What is the misconception of the risk-reward relationship? What is the role and the ultimate goal of the decision maker? Examples, implications.% Return on T-Bills, Stocks And Market Index State of Economy Probability T-Bills Phillips Pay-up Rubber-Made Market index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15 Above Average 0.3 7 35 -10 45 29 Boom 0.1 7 50 -20 30 43 Mean Standard Deviation Coefficient of Variation Covariance with MP Correlation with Market Index Beta CAPM Req. Return Valuation (Overvalued/Undervalued/Fairly Valued) Nature of Stock (Aggressive/Defensive) Fill the parts in the above table that are shaded in yellow. Using the data generated in the previous question, plot the Security market line (SML). Superimpose…% Return on T-Bills, Stocks And Market Index State of Economy Probability T-Bills Phillips Pay-up Rubber-Made Market index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15 Above Average 0.3 7 35 -10 45 29 Boom 0.1 7 50 -20 30 43 Mean Standard Deviation Coefficient of Variation Covariance with MP Correlation with Market Index Beta CAPM Req. Return Valuation (Overvalued/Undervalued/Fairly Valued) Nature of Stock (Aggressive/Defensive) Fill the parts in the above table that are shaded in yellow. Show the working for the parts in yellow. Using the data generated in the previous question, plot…
- An investor has $24,000 to invest in bonds of AAA and B qualities. The AAA bonds yield an average of 6% and the B bonds yield 10%. The investor requires that at least three times as much money should be invested in AAA bonds as in B bonds. How much should be invested in each type of bond to maximize the return? What is the maximum return? Define the variables needed to solve this problem. Organize your given information. (This part NOT graded, but encouraged.) Write the complete linear programming problem, which includes the objective function and all constraints. Graph and make sure all lines are labeled and shaded/solution region is clear and easy to identify. Create a corner point chart. Remember to mark your solution. Answer in a complete sentence or two: How much should be invested in each type of bond to maximize the return? What is the maximum return?Uncertainty and willingness to pay for insurance. Utility = (Wealth)1/3 Prob(flood) = .04 Prob(no flood) = .96 Total wealth if flood = $100,000. Total Wealth if no flood = $800,000. Find: (i) expected value, (ii) expected utility, (iii) certainty equivalent, and (iv) maximum willingness to pay for a policy that provides 100% flood insurance coverage. Draw the utility function and include all solved values on the diagram. What is the average gross profit per insurance customer, if each customer is charged his own maximum willingness to pay?1. Consider a position consisting of a K200,000 investment in Asset A and a K300,000 investment in Asset B. Assume that the daily volatilities of the assets are 1.5% and 1.8% respectively, and that the coefficient of correlation between their returns is 0.4. What is the five day 95% Value at Risk (VaR) for the portfolio (95% confidence level represents 1.65 standard deviations on the left side of a normal distribution)?