Reading 34, Risk Management, P278, Q9. A sneaky question.

CFA Level III
#1

This is my 3rd time that I’ve got it wrong…even thought about interpolation.

#2

you need a 1% VAR - so sum up probability on the right column till you hit 1%. First two rows.

So 1% VAR = at least 40%. so 1 % VAR = 40% * 10 Mill = 4 Mill

5% VAR = 10% (same way till you reach 5%) 5% VAR = 10% * 10 Mill = 1 Mill.