Pilot Q3 puzzles: standard deviation = npv volatility? how to calculate and interprete VaR?

Please help here. I’m totally confused about the terms/concepts related to VaR.

Puzzle 1: standard deviation = npv volatility?

From Examiner’s answers to Pilot Paper Q3:

The net present value of this project is calculated using a discount rate of 8 per cent and gives a value of $1.964 million. The volatility attaching to the net present value of $1.02 million indicates that there is (z) standard deviations between the expected net present value and zero as follows:
z = (1.964–0)/$1.02 = 1.9255

So the standard devation is 1.9255???

Then in “projectVaR = N(0.95)??T”
==> projectVaR = 1.645 * 1.02 *3.162=$5.3million

Why is $1.02m (net present value volatility given in the question) instead of 1.9255 (value of s) applied???

Puzzle 2: formular to calculate VaR and its interpretation

The answer also says “VaR measures the value which could potentially be lost by the business”. So does it mean in this scenario there’s a 5% chance of losing $5.3million?

There’s another version of interpretation in “Open Tuition 2011 revision notes”. Scenario: expected value of portfolio in 2 weeks time is $50m, standard deviation $4.85m. At 95% confidence level, the VaR is $42m.

Formular in use: z= -1.65 = (VaR – $50m)/$4.85m
==> VaR is $42m.

Interpretation: 5% chance that the portfolio value will fall below $42m.

I’m totally confused by the two versions of calculations and interpretations. Please help. Appreciate it!!!