Suppose a world has two risky assets:StkC andStkD. The following table shows the holding period returns in each scenario. Suppose theT-bill rate is 3%.
Scenario
Probability
Return for StkC
Return for StkD
Severe recession
0.03
-40%
-12%
Mild Recession
0.02
-10%
10%
Normal
0.9
6%
Mild growth
20%
8%
Boom
60%
-20%
Which answer is the closest value to the fifth-percentile value at risk (VaR) of holdingStkC?
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