- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 42. Measuring and Managing Market Risk
- Subject 1. Value at Risk

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**CFA Practice Question**

Assume there are 250 trading days in a year. The annual expected return is 10% and the standard deviation is 20%. What is the daily 5% parametric VaR for a $100 million portfolio?

B. $23 million

C. $17 million

A. $2.05 million

B. $23 million

C. $17 million

Correct Answer: A

Daily standard deviation: 0.2/250

[(E(R

Daily expected return: 0.1/250 = 0.0004

Daily standard deviation: 0.2/250

^{1/2}= 0.012649[(E(R

_{p}) - 1.65 σ_{p}) (-1)] 100 million = [(0.0004 - 1.65 x 0.012649) (-1)] 100 million = $2.047 million###
**User Contributed Comments**
1

User |
Comment |
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davidt87 |
anyone know why they are finding the square root of the standard deviation? did they mistakenly think the question gave us variance? |