Q1. Suppose the historical standard deviation of a stock index has been 0.6% per day, and an investor has a $10,000 investment in the index. Calculate the 1-day, 5% VaR in dollars.

Q2. Provide two kinds of interpretation to the result in part 1(Q1).

Q3. Suppose you invested $15,000 in the stock of ABC company in early 2020. You have compiled the monthly returns on this stock during the period of 2015-2019, as given below.

2015	2016	2017	2018	2019
-0.0214	-0.0347	-0.1824	-0.0723	-0.1017
-0.0106	-0.0566	-0.0070	-0.1021	0.0264
0.0262	0.0158	0.0010	0.1114	0.1344
-0.1196	0.0862	-0.0648	0.2257	0.0786
-0.0313	0.0675	0.2378	-0.0043	-0.1772
-0.0362	0.0609	-0.0512	0.1867	-0.0953
-0.1137	-0.0203	0.1229	-0.0255	0.0978
0.0401	0.0100	-0.1156	0.1831	-0.1110
0.0129	-0.0230	-0.2416	-0.0360	0.1020
0.0652	0.1087	-0.2591	-0.0531	0.1099
0.1196	-0.1980	-0.0844	-0.0228	-0.0816
-0.0789	-0.0012	-0.0833	0.0170	0.0250

Using the historical method, calculate the 1% monthly VaR in dollars.

Q4. List and describe three general limitations of VaR.

Q5. Because VaR has certain limitations, managers will often backtest their VaR models. In addition, there are measures that can be used as supplements to the regular VaR measure (i.e., supplement the information provided by VaR). List and describe three complementary measures that can be used as supplements to VaR.