Question 3 (a) You are given that the t-day 99% VaR of a portfolio is USD1 million. What does it mean? [10] (b) A bank reports a daily 99% VaR as USD1.5 million. Assuming daily returns follow an i.i.d. normal distribution, what should be the 99% 10- day VaR? What is the expected number of daily exceptions for the bank over the last year? [10] (c) Consider a long position of USD 100 million in a par 10-year note. Payments are annual. Interest rates are at 6% and the volatility of changes in interest rates is 0.25% over the next month. Assuming normal distributions for yields, what is the monthly 99% yield changes? Calculate the VaR of the position. [10]