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A large bank currently has a security portfolio with a market value of $145 million. The daily returns on the bank’s portfolio are normally distributed with 80% of the distribution lying within 1.28 standard deviations above and below the mean and 90% of the distribution lying within 1.65 standard deviations above and below the mean. Assuming the standard deviation of the bank’s portfolio returns is 1.2%, calculate the VAR(5%) on a one-day basis. A. $2.23 million. B. $2.04 million. C. cannot be determined from information given. D. $2.87 million. |