1. The problem statement, all variables and given/known data Find the VaR for an investment of $500,000 at 1% given that the investment is expected to grow 10% every year with standard deviation of 35% and that the investment is held for two years. 2. Relevant equations E(X + Y) = E(X) + E(Y) E(X*Y) = E(X) * E(Y) (for independent random variables) var (X + Y) = var (X) + var (Y) (for independent random variables) 3. The attempt at a solution So, at first, I thought that the expected return if the investment were held for two years would be: E(X+[(1+X)*Y]) Although I can compute that, if that were the case, then the variance for the two year investment would be given by: var (X + [(1+X)*Y]) = var (X) + var (Y) + var (Y*X) But that cannot be the case I do not know how to calculate that last term. Upon doing some research, it appears that I should be computing E(X + Y) and var (X + Y) instead. However, that does not make much sense to me. For example: if I were to invest 100 dollars on a stock that yielded a return of 10% with SD = 0% every year, then my return on the 100 dollars after two years would be 21%, not 20%, right? Can anyone shed some light on this for me please? Thank you in advance!