9.Lowell Bank reports a one-day 95% VaR as $17 million. Assuming daily and 20-day returns follow a normal distribution, what is the 20-day 99% VaR?

$54 million

$67 million

$76 million

$107 million

10.Two types of risk in a bond portfolio, price risk and reinvestment risk, will cancel out exactly at a time horizon equal to

difference between the shortest and longest durations of the individual bonds in the portfolio

average bond maturity in the portfolio

duration of the portfolio

average of the longest duration of the individual bonds in the portfolio

11.VaR is not a coherent measure because of

monotonicity

subadditivity

homogeneity

translation invariance

12.You are asked by your chief risk officer to evaluate arguments he has heard to switch from value at risk (VaR) to conditional VaR (expected shortfall) as your firm's main risk measurement tool. Which of the following arguments is correct? Choose all that are correct.

a.Conditional VaR is a coherent risk measure in contrast to VaR.

b.Conditional VaR is more stable measure since it shows less sensitivity to data errors

c.VaR is sensitive to the entire tail of the distribution, while Conditional VaR does not change even with large increases in the losses beyond the cutoff percentile at which the VaR is measured.

d.Conditional VaR may have negative diversification effects.