value at risk - Tisa co (6/12)

We can't add standard deviations, but we can add the variances (which is the standard deviation squared). The examiners answer to Tisa is set out badly. The SD for 1 year is 800,000, so the variance for 1 year is 800,000^2 Therefore the variance for 5 years is 5 x 800,000^2 Therefore the SD for 5 years is the square root of (5 x 800,000^2) = 800,000 x sq rt of 5 = 1788854 Multiply by 2.33 and you get 4168031 (as per the answer). In general terms, the SD for n years = std deviation for 1 year x (sq root of n) My free lecture on VAR will help you: https://opentuition.com/acca/p4/acca-p4-value-at-risk/

thank u sir...

You are welcome :-)