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c) A company has two portfolios, one of shares and the other of bonds. Suppose the portfolio of bond is worth Ksh. 25 Million with

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c) A company has two portfolios, one of shares and the other of bonds. Suppose the portfolio of bond is worth Ksh. 25 Million with volatility of 0.08 per year and the portfolio of shares is worth Ksh. 5 million with volatility of 0.125 per year. Measure the VaR over the next 20 days with 95% confidence interval for the shares portfolio, bond portfolio and combined portfolio if the correlation coefficient between changes in prices of shares and bonds is 0.3. What is the effect of diversifying the portfolio? (11 Marks)

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