Consider a stock portfolio consisting of two stocks with normally distributed returns. The joint distribution of daily returns is constant over time and there is no serial correlation. Stock Epsilon has a market value of $100,000 with an annualized volatility of 22%. Stock Omega has a market value of $175,000 with an annualized volatility of 27%. Calculate the 95% confidence interval 1-day VaR of the portfolio. Assume a correlation coefficient of 0.3. Round to the nearest dollar assuming 252 business days in a year. The daily expected return is assumed to be zero.
Consider a stock portfolio consisting of two stocks with normally distributed returns. The joint distribution of daily returns is constant over time and there is no serial correlation. Stock Epsilon has a market value of $100,000 with an annualized volatility of 22%. Stock Omega has a market value of $175,000 with an annualized volatility of 27%. Calculate the 95% confidence interval 1-day VaR of the portfolio. Assume a correlation coefficient of 0.3. Round to the nearest dollar assuming 252 business days in a year. The daily expected return is assumed to be zero. A.$3,641; B.$5,023; C.$6,007; D.$7,176