12. Suppose the 7-year zero-coupon bond has a yield of 6% and yield volatility of 10%

and the 10-year zero-coupon bond has a yield of 6.5% and yield volatility of 9.5%.

The correlation between the 7-year and 10-year yields is 0.96. What are 95% and 99% 10-day VaRs for an 8-year zero-coupon bond that pays $10m at maturity?

assume that the risk-free rate is 0.08 and that there are three stocks with a price of $100 and the following characteristics:

α σ δ Correlation with B Correlation with C Stock A 0.15 0.30 0.00 0.25 0.20 Stock B 0.18 0.45 0.02 1.00 0.30 Stock C 0.16 0.50 0.00 0.30 1.00