1.

a. Suppose that for the bank in part (b), the 10-day, 1% VaR for the trading book is $120 million and the multiplier is 4.0. Determine the total capital this bank needs to have to attain the required level of 8%.

b.

Suppose that an investment has 0.5% chance of a loss of $10 million and a 99.5% chance of

a loss of $1 million. What is the Value-at-Risk (VaR) for this investment when the confidence level is 99%?