### Select your language

Suggested languages for you: Answers without the blur. Just sign up for free and you're in → Q1B.

Expert-verified Found in: Page 141 ### Essentials Of Investments

Book edition 9th
Author(s) Zvi Bodie, Alex Kane, Alan Marcus, Alan J. Marcus
Pages 748 pages
ISBN 9780078034695

# Suppose you’ve estimated that the fifth-percentile value at risk of a portfolio is -30%. Now you wish to estimate the portfolio’s first-percentile VaR (the value below which lie 1% of the returns). Will the 1% VaR be greater or less than -30%?

1% VaR will be less than -30%.

See the step by step solution

## Given information

Fifth-percentile VaR of a portfolio = -30%

## Explanation

VaR or “Value at Risk” is the measure of downside risk.

In the above scenario, since the percentile or probability of a return has declined, the magnitude of that return will also decline. Thus, a 1 percentile probability will produce a smaller VaR than a 5 percentile probability. Therefore 1% VaR will be less than -30%. ### Want to see more solutions like these? 