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A portfolio manager has a $50 million investment in a high-tech stock with a volatility of 50% and a CAPM beta of 1. The volatility of 50% and the CAPM beta are estimated using daily returns over the past 252 days. A firm's capital allocation allocates capital based on a 1% VaR with a one-year horizon. The capital allocation is USD 66 2/3 million and exceeds the initial market value of the stock. Which of the following statements about the firm’s capital allocation scheme is correct?
Choose one answer.