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Assignment 6 ( 5 points ) Suppose that the price of Asset X at close of trading yesterday was 1 0 0 and its volatility

Assignment 6(5 points)
Suppose that the price of Asset X at close of trading yesterday was 100 and its volatility
was estimated as X.X% per day. The price of X at the close of trading today is 96.
Suppose that daily gains (losses) are normally distributed with standard deviation of $6
million.
Estimate the minimum regulatory capital the bank is required to hold. Assume a
multiplicative factor of 4.0.
Assignment 7(5 points)
A fund's risk appetite is such that it wants to be 97.5% certain it will not lose more than
20% in any one year.
The performance of the S&P 500 between 1970 and 2021 shows a mean and standard
deviation of returns over the period of 12.45% and 16.88%.
Assume an annual risk-free rate of 4%.
Using the performance of the S&P 500 between 1970 and 2021, determine the beta the fund
should have.
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