A bank holds a trading portfolio (long position) valued at $200,000. The distribution of the daily return on this portfolio is normally distributed with a mean zero and a standard deviation of 1%. What is the DEAR, i.e., the potential loss of the banks portfolio which has a chance of 5% to happen (5% chance of adverse move) if the beta of the portfolio is one? Assume a 90% confidence interval.

Select one:

a.

$1,000

b.

$2,300

c.

$10,000

d.

$3,300

e.

$1,650