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Suppose a bank holds a $2 million trading position in stocks that reflect a U.S. stock market index (e.g., the Wilshire 5000 index). Suppose that
Suppose a bank holds a $2 million trading position in stocks that reflect a U.S. stock market index (e.g., the Wilshire 5000 index). Suppose that the daily changes in returns for Wilshire 5000 have a mean 0 and standard deviation 2%. Determine the bank's DEAR for this equity position using a 99 percent confidence level.
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