RISK MANAGEMENT

Suppose that your firm's portfolio consists of three assets with normally distributed returns. The first asset has an annual expected return of 12 percent and an annual volatility of 15 percent. The rm has a long position of $43 million in that asset. The second asset has an annual expected remrn of 18 percent and an annual volatility of 2? percent. Your firm has a long position of $100 million in the second asset. The third asset has an annual expected return of 15% and the volatilityIr of 20%. The rm has a short position of $50 million in that asset. The correlations between returns on these assets are given in the table below: :1. Compute the standard deviation of the rm's portfolio. b. Compute its 5 peroent annual VaR