RSK4805 Assignment 3 (COMPLETE ANSWERS) 2024 - DUE 15 August 2024
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Course
Market Risk Management (RSK4805)
Institution
University Of South Africa (Unisa)
Book
Market Risk Management
RSK4805 Assignment 3 (COMPLETE ANSWERS) 2024 - DUE 15 August 2024 ; 100% TRUSTED Complete, trusted solutions and explanations. For assistance, Whats-App 0.6.7-1.7.1-1.7.3.9. Ensure your success with us.. Question 1 (25 marks)
1.1 A bank estimates that its profit next year is normally distributed w...
To be 99% sure that the bank will have positive equity at the end of the year, we need to
find the value X where the profit plus equity is greater than zero, given the normal
distribution parameters.
Mean=0.8%
Standard deviation=2%
The z-value for 99% confidence is 2.33.
X=Mean+(z × Standard deviation)
X=0.8%+(2.33×2%)
X=0.8%+4.66%
X=5.46% Terms of use
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QUESTION 1
1.1.
To be 99% sure that the bank will have positive equity at the end of the year, we need
to find the value X where the profit plus equity is greater than zero, given the normal
distribution parameters.
Mean=0.8%
Standard deviation=2%
The z-value for 99% confidence is 2.33.
X=Mean+(z × Standard deviation)
X=0.8%+(2.33×2%)
X=0.8%+4.66%
X=5.46%
Therefore, the bank needs 5.46% equity as a percentage of assets to be 99% sure it
will have positive equity at the end of the year.
1.2.
Step-by-Step Calculation
Disclaimer
Extreme care has been used to create this document, however the contents are provided “as is” without
any representations or warranties, express or implied. The author assumes no liability as a result of
reliance and use of the contents of this document. This document is to be used for comparison, research
and reference purposes ONLY. No part of this document may be reproduced, resold or transmitted in any
form or by any means.
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