Financial Risk Manager Part 1

To calculate the variance of the equity value, we use the formula:

$\text{Var}(X) = E(X^2) - [E(X)]^2$

Step 1: Calculate Expected Value E(X) $E(X) = 0.33 \times 62.15 + 0.39 \times 60.75 + 0.28 \times 63.0 = 61.842$

Step 2: Calculate E(X²) $E(X^2) = 0.33 \times 62.15^2 + 0.39 \times 60.75^2 + 0.28 \times 63.0^2 = 3,825.3048$

Step 3: Calculate Variance $\text{Var}(X) = 3,825.3048 - 61.842^2 = 0.8718$

The variance is approximately 0.87, which matches option A.