VAR quiz minimum, expected, next, currently

Carson

XYZ 95% surplus at risk calculated to be $500 million for an annual horizon. The expected return on XYZ asset base (currently at $2 billion) is 5%. The plan has a surplus of $100 million. Jon uses a 5% probability level to calculate the minimum amount by which the plan will be underfunded next year.

Using Jon's 5% probability level, the minimum amount by which TXYZ plan will be underfunded next year is closest to:

A) $5 million.

B) $25 million.

C) $300 million.

susana

Answer = c

$300 million

The current surplus is $100 million, and the asset base is also expected to generate $100 million ($2,000 million

Darien

there is 1/4 a page in V5 about SAR (244-245)
this kind of question should not be tested,

where did you get it?

mp3bu

Yes dont you need the std dev to answer this - var requires this (STD Dev * 1.65)?

aidebaobao

C? But you're not given standard deviation?

mar350

I thought surplus at risk was only applied to the surplus not the whole asset base.

IAmNeil

C, but I will admit I have no idea the formula.

Just went with (2,000 * 1.05 + 100 - 500) - 2000



Edited 2 time(s). Last edit at Monday, May 23, 2011 at 01:59PM by Paraguay.

oneboy

C, also think either too easy or there is a trick?