QUESTION: 37

Will owns $400,000 of shares in Company X.
Company X has a daily volatility of 1% of its share price. Calculate the 28 day value at risk that shows the most Will can expect to lose during a 28 day period. (Will wishes to be 90% certain that the actual loss in any month will be less than your predicted figure).
Give your answer to the nearest $000.

$27
27.001

Answer(s): A

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QUESTION: 38

Which of the following best describes the relevance of value at risk (VaR) as a decision tool?

VaR quantifies past volatility
VaR quantifies future volatility
VaR quantifies the maximum loss that could ever be incurred
VaR can only measure downside risk

Answer(s): A

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QUESTION: 39

The long-term prospects for interest rates in the UK and the USA are 2% and 6% per annum respectively.
The GBP/USD spot rate is currently GBP/USD1.71.
Using interest rate parity theory, what GBP/USD spot rate would you expect to see in six months' time?