1. Bank of Baroda limited, is one of the leading commercial banks in Zambia. The banks credit risk weighted assets are valued at K15 million. The bank has also invested K100 million in an Equity portfolio that follows the LuSE Index. The Equity portfolio is exposed to market risk, and the Bank of Zambia regulations requires all commercial banks to maintain a minimum capital to cover market risk at level of Daily Var times a factor of 3

(VaR * 3).The returns on LuSE are normally distributed with a mean of zero and a 1% standard deviation. The banks operational risk weighted assets are K 5 million

Required:

1. Calculate the 1 day VaR with a 99% confidence level ( 3 marks)
2. Calculate the banks minimum capital required to cover market risk ( 1 mark)
3. Calculate the banks minimum total risk weighted minimum capital. ( 2 marks)

Explain the Relative frequency method of assigning probabilities