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A passive fund consists of 10% investment in the risk-free asset and 90% investment in the market portfolio. Suppose the market portfolio daily return has
A passive fund consists of 10% investment in the risk-free asset and 90% investment in the market portfolio. Suppose the market portfolio daily return has a mean of 0.1% and a standard deviation of 0.5%. The daily risk-free rate is 0%. The 5-percentile of a standard normal distribution is Z=-1.645. Using parametric method, the closest estimate of the fund's 1-day 95% Value at Risk (VaR) is: O a. a. 0.723% O b. 1.454% Oc 0.650% O d. 0.534%
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