1. The price volatility component of DEAR for fixed-interest security is a product of

   1. Modified duration and adverse move in yield

   2. Price sensitivity of the position and the dollar market value of the position

   3. the dollar market value of the position and the adverse move in yield

   4. all of them are correct

4. Bank Two has determined that its inventory of 20 million euros (EUR) is subject to market risk. The spot exchange rates are $0.40/EUR . The s of the spot exchange rates of the EUR based on the daily changes of spot rates over the past six months is 65 bp. Determine the banks 10-day VAR for this currency. Use adverse rate changes in the 99^th percentile.

   1. $85,800

   2. $271,232

   3. $121,160

   4. $101,920