Question

3. Value at risk (VAR) has become a key concept in financial calculations. The VAR of an investment is

defined as that value v such that there is only a 1 percent chance that the loss from the investment will

exceed v.

If the gain from an investment is a normal random variable with mean 15 and variance 36, determine the value

at risk v. (If X is the gain, then-X is the loss.)