Answer:
The 5% VaR (value-at-risk) for this stock 0.858
Explanation:
Value at risk determines the value of the investment at risk of loss. It shows how much of the investment might lose in the given market conditions.
Now deter,ine the value at risk formula
Var = Mean + Standard Deviation x Z score value
Where
Mean = 20%
Standard Deviation = 40%
Z score value = Z Score at significance 5% = 1.645
Placing values in the formula
Var = 20% + 40% x 1.645
Var = 0.2 + 0.4 x 1.645
Var = 0.2 + 0.658
Var = 0.858
