You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T-bill with a rate of return of 0.05.

What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.06?

Select one:

A.

60% and 40%

B.

50% and 50%

C.

40% and 60%

D.

30% and 70%

E.

Cannot be determined.

If the 1% VaR for a portfolio estimated with Weighted Historical Simulation is larger in absolute value than the 1% VaR estimated with Historical Simulation over the same historical window, that means that:

a.

There were stronger portfolio value increases at the beginning of the historical window than recently

b.

There were stronger portfolio value declines at the begining of the historical window than recently

c.

Weighted Historical Simulation should not be applied in this context

d.

There were stronger portfolio value increases recently than at the beginning of the historical window

e.

There were stronger portfolio value declines recently than at the beginning of the historical window

If you use a sample of 450 observations to obtain Value-at-Risk using Historical Simulation, which statment is NOT correct:

a.

2% VaR is the 9th largest return in the sample

b.

5% VaR is the midpoint between the 22nd smallest and 23rd smallest returns in the sample

c.

10% VaR is the 45th smallest return in te sample

d.

Conservative 1% VaR is the 4th smallest return in the sample

e.

Interpolated 1% VaR is the midpoint between the 4th and the 5th smallest returns in the sample