Explanation:
Calculate the daily VaR for each one using the following formula: VaR / √time. Thus, the one-day VaR implied by the correct answer would be calculated as $13 million / √5 = $5.8 million, whereas it is $6.7 million for the other answer options.
(Book 4, Module 48.2, LO 48.f)
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Question 24
A newly qualified FRM holder and risk analyst has been asked by his supervisor to calculate the VaR for Phantom PLC over 5-, 10-, 15-, and 20-day periods. The returns are independent and identically normally distributed. After reviewing the analyst's results, the analyst's supervisor discovers an inconsistency. Which of the following is inconsistent with the rest of the risk analyst's findings?
A
The 5-day VaR is $13 million.
B
The 10-day VaR is $21.2 million.
C
The 15-day VaR is $26 million.
D
The 20-day VaR is $30 million.
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