This question is related to Value at risk:

Can you provide a step-by-step of how to obtain this answer:

A stock has a price of $50 and pays no dividend. The historical standard deviation of the stock is 25% and the expected return on the stock is 12%. At the 95% confidence level, what is the Tail VaR over the next 6 months?

(a)$2.50

(b)$13.63

(c)$22.36

(d)$47.50

Answer: B

From the textbook, here is a similar example:

Tail VaR. A shortcoming of VaR is that it specifies the minimum loss that will occur with a given probability. In practice we would like to know the expected magnitude of the loss should a loss occur. This is called the tail VaR, conditional VaR (CVaR), or the expected tail loss. For the simple case where the portfolio consists of one stock, we can assess the severity of the loss by computing the average loss conditional upon the stock price being less than S(c). Whereas VaR specifies the level, S(c), that will be breached with probability c, tail VaR measures the average severity of the breach. For the single stock case, tail VaR is defined as E[So - SylST