On the sweser mock they have this question
“Using the variance/covariance method, the 1-year value at risk in the Ambassador Fund with 97.5% probability is closest to:”
Then they say,
“With a 97.5% probability, the lower bound on the distribution is the mean less two standard deviations which equals 10% − 2(10%) = −10%. On a $100 million investment, therefore, the VAR using the variance/covariance method is $100 million times 10% or $10 million.”
This is wrong, right? Or at least, not in line with the CFA textbooks.
What they are solving for is VAR with a 2.5% probability.
97.5% var would be the mean PLUS two standard deviations.