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A firm has currently assets in place worth $60 million that have an annual volatility (standard deviation) of 20%. A new investment will add assets
A firm has currently assets in place worth $60 million that have an annual volatility (standard deviation) of 20%. A new investment will add assets worth $40 million and a volatility of . Use the data in the worksheet "Q3 (Data)." The worksheet contains the firm's estimates of the \% returns (annual) that the new investment will earn under different scenarios, along with the estimated probabilities of the different scenarios. Calculate the standard deviation of returns using this data, and use that as your z of . Please note that using the excel function for calculating the standard deviation is not enough. You must use the probabilities for each return. You can then assume that the correlation coefficient between the two sets of assets (existing assets and the assets from the new investment) is 0.1 (or 10% ). Calculate the combined volatility and the VAR at 95% confidence level (both in terms of dollars and \% of total assets). A firm has currently assets in place worth $60 million that have an annual volatility (standard deviation) of 20%. A new investment will add assets worth $40 million and a volatility of . Use the data in the worksheet "Q3 (Data)." The worksheet contains the firm's estimates of the \% returns (annual) that the new investment will earn under different scenarios, along with the estimated probabilities of the different scenarios. Calculate the standard deviation of returns using this data, and use that as your z of . Please note that using the excel function for calculating the standard deviation is not enough. You must use the probabilities for each return. You can then assume that the correlation coefficient between the two sets of assets (existing assets and the assets from the new investment) is 0.1 (or 10% ). Calculate the combined volatility and the VAR at 95% confidence level (both in terms of dollars and \% of total assets)
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