A client is evaluating an investment in Indochina requiring an initial expenditure (period 0) of 10,000, and which then in periods 1 and 2 gives a benefit V1 and V2. Assume that the discount rate to evaluate this project is r = 10% (This rate is a known value and not a random variable). If the benefits follow the following distribution:

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What is the Value at Risk (VaR) of the NPV from such investment?


closed as off-topic by Bob Jansen Apr 5 at 6:10

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  • $\begingroup$ $NPV=V1/1.1+V2/1.1^2$ So NPV is normally distributed. $\endgroup$ – Alex C Apr 5 at 2:31
  • $\begingroup$ What about the VaR? $\endgroup$ – FranklinBoggo Apr 5 at 2:32
  • $\begingroup$ The VaR of a normal variable with known mean and variance is not too difficult to calculate. $\endgroup$ – Alex C Apr 5 at 2:33
  • $\begingroup$ Apologies, I am just introducing myself to working with multiple random variables $\endgroup$ – FranklinBoggo Apr 5 at 2:34
  • $\begingroup$ Yes but asking homework problems without showing attempts to solve is not a well-regarded approach to learning $\endgroup$ – James Spencer-Lavan Apr 5 at 4:55

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