Portfolio A has total assets of $14 million and an expected return of 12.50 percent. Historical VAR of the portfolio at 5 percent probability level is $2,400,000. What is the portfolio’s standard deviation? A. 12.50%. B. 14.65%. C. 17.97%. D. 15.75%.
VAR = Portfolio Value [E(R)-zσ] -2,400,000 = 14,000,000[0.125 – (1.65)(X)] -2,400,000 = 1,750,000 – 23,100,000(X) X = 17.97%. Note that VAR value is always negative.
