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Basic Question 0 of 6
A financial firm may determine that it has a 5% one-month value at risk of $100 million. This means ______.
II. there is a 5% chance that the firm could lose a maximum of $100 million in any given month.
III. a $100 million loss should be expected to occur once every 20 months.
I. there is a 5% chance that the firm could lose more than $100 million in any given month.
II. there is a 5% chance that the firm could lose a maximum of $100 million in any given month.
III. a $100 million loss should be expected to occur once every 20 months.
User Contributed Comments 5
| User | Comment |
|---|---|
| josephk417 | if 99% confidence interval is one in a hundred... Why is 95% one in 20? |
| khalifa92 | 5/100=20 |
| jjenkins7 | 1 out of 20 months = 5% |
| jorgeandre | III is incorrect because it is not expected to lose 100M, it at least 100 million |
| davidt87 | agreed jorgeanre and joseph how did you get here? |
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Learning Outcome Statements
explain the assumptions and justify the selection of the two-stage DDM, the H-model, the three-stage DDM, or spreadsheet modeling to value a company's common shares;
describe terminal value and explain alternative approaches to determining the terminal value in a DDM;
calculate and interpret the value of common shares using the two-stage DDM, the H-model, and the three-stage DDM;
explain the use of spreadsheet modeling to forecast dividends and to value common shares;
evaluate whether a stock is overvalued, fairly valued, or undervalued by the market based on a DDM estimate of value.
CFA® 2025 Level II Curriculum, Volume 3, Module 21.