You have a portfolio valued at $1,000. Over the next twelve months it loses 75% of its value. What return does the portfolio need to earn over the following twelve months to restore the portfolio to its original value?

Question

Quizplus · Accepted Answer

After losing 75% of its value, the portfolio's new value is $250 ($1,000 x 25%). To restore the portfolio to its original value, it needs to earn back $750 ($1,000 - $250). Since this return is based on the new value of $250, the portfolio needs to earn a return of 300% ($750 / $250) to restore its original value. Therefore, the correct answer is (C) 300%.

You Have a Portfolio Valued at $1,000