An investor has S12 milion invested in a bond The bond has a mean return of 8 and a volatility of 20Assume that returns are normally distributed At the 95 confidence level one-sided what is the return

To calculate the returnVaR (Value at Risk) for the bond, we need to consider the mean return, volatility, confidence level, and holding period.

Given: Investment amount (A) = $12 million Mean return (μ) = 8% Volatility (σ) = 20% Confidence level = 95% (one-sided) Holding period (n) = 20 trading days

First, we need to convert the annual mean return and volatility to daily values: Daily mean return = μ_daily = μ / 252 Daily volatility = σ_daily = σ / sqrt(252)

Next, we calculate the z-score corresponding to the given confidence level: Z-score = z = invNorm(1 - confidence level) = invNorm(1 - 0.95) = invNorm(0.05)

Now, we can calculate the returnVaR using the formula: ReturnVaR = A * z * σ_daily * sqrt(n)

ReturnVaR = $12,000,000 * invNorm(0.05) * (20% / sqrt(252)) * sqrt(20)

Using the invNorm function in a statistical calculator or software, we find invNorm(0.05) ≈ -1.645.

ReturnVaR = $12,000,000 * (-1.645) * (0.20 / sqrt(252)) * sqrt(20)

ReturnVaR ≈ -$3,827,864.18

Therefore, at the 95% confidence level, the returnVaR for the bond held for 20 trading days is approximately -$3,827,864.18