A portfolio manager determines that his portfolio has an expected return of $20,000 and a standard deviation of $45,000. Given a 95% confidence level, what is the portfolio's VAR? A. $54,250. B. $74,250. C. $43,500.
The expected outcome is $20,000. Given the standard deviation of $45,000 and a z-score of 1.65 (95% confidence level for a one-tailed test), the VAR is –54,250 [= 20,000 – 1.65 (45,000)].
