Answer: USD 145,770

## Explanation To calculate the annual VaR at 95% confidence level, we need to: 1. **Calculate daily standard deviation**: - Daily variance = 0.0002 - Daily standard deviation (σ_daily) = √0.0002 = 0.014142 2. **Convert to annual standard deviation**: - Annual standard deviation (σ_annual) = σ_daily × √250 - σ_annual = 0.014142 × √250 = 0.014142 × 15.8114 = 0.2236 3. **Calculate VaR at 95% confidence level**: - For 95% confidence level, z-score = 1.645 - VaR = Portfolio Value × σ_annual × z-score - VaR = 6,247,000 × 0.2236 × 1.645 - VaR = 6,247,000 × 0.3678 = USD 2,297,854 Wait, this gives us USD 2,297,854 which corresponds to option C. However, let me verify this calculation. **Alternative approach using daily VaR**: - Daily VaR = Portfolio Value × σ_daily × z-score - Daily VaR = 6,247,000 × 0.014142 × 1.645 = USD 145,770 - Annual VaR = Daily VaR × √250 = 145,770 × 15.8114 = USD 2,305,000 Looking at the options: - Option B: USD 145,770 (this is the daily VaR) - Option C: USD 2,297,854 (this is the annual VaR) The question asks for **annual VaR**, so the correct answer should be **USD 2,297,854**, which corresponds to option C. **Final Calculation**: - Portfolio Value = USD 6,247,000 - Daily Variance = 0.0002 - Daily Standard Deviation = √0.0002 = 0.014142 - Annual Standard Deviation = 0.014142 × √250 = 0.2236 - VaR (95%) = 6,247,000 × 0.2236 × 1.645 = USD 2,297,854 Therefore, the annual VaR at 95% confidence level is closest to **USD 2,297,854** (Option C).

Author: LeetQuiz .