(Answered) VaR of the portfolio

Finance

Problem: A bank invests $18 million in a stock fund and $32 million in a bond fund. Use the following information. The volatility of the stock fund is 25% per annum and the volatility of the bond fund is 15% per annum. The correlation between the stock fund and the bond fund is -0.44 and assume that the VaR follows the normal distribution. Be sure to support your response with specifics.

Required:

Question 1: Calculate 1-day 99% VaR of the portfolio.

Question 2: Calculate 10-day 99% VaR of the portfolio.

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