Question 5 [ 20 marks]: Suppose each of the two independent projects has a probability of 0.02 of a loss of $10 million and a probability of 0.98 of a loss of $1 million during a one-year period. The one-year, 97.5%VaR for each project is $1 million. The projects returns are independent of each other. (a) Determine the VaR for the one of the projects when the confidence level is 97.5%? [2 marks] (b) Calculate the expected shortfall for one of the projects when the confidence level is 97.5% ? [ 5 marks] (c) Compute the VaR for a portfolio consisting of the two projects when the confidence level is 97.5% ? [ 5 marks] (d) Compute the expected shortfall for a portfolio consisting of the two investments when the confidence level is 97.5% [ 5 marks] (e) Determine whether VaR and ES satisfies the subadditivity condition? [3