You are given the following information about a portfolio you are to manage. For the long-term you are bullish, but you think the market may fall over the next month. $$\begin{array} { | l | l | }
\hline \text { Portfolio Value } & \$ 1 \text { million } \
\hline \text { Portfolio's Beta } & 0.60 \
\hline \text { Current S\&P500 Value } & 1400 \
\hline \text { Anticipated S\&P500 Value } & 1200 \
\hline
\end{array}$$
-If the anticipated market value materializes,what will be your expected loss on the portfolio?
A)14.29%
B)16.67%
C)15.43%
D)8.57%
E)6.42%

Question

You are given the following information about a portfolio you are to manage. For the long-term you are bullish, but you think the market may fall over the next month. $$\begin{array} { | l | l | } 
\hline \text { Portfolio Value } & \$ 1 \text { million } \
\hline \text { Portfolio's Beta } & 0.60 \
\hline \text { Current S\&P500 Value } & 1400 \
\hline \text { Anticipated S\&P500 Value } & 1200 \
\hline
\end{array}$$
-If the anticipated market value materializes,what will be your expected loss on the portfolio?
A)14.29%
B)16.67%
C)15.43%
D)8.57%
E)6.42%

Quizplus · Accepted Answer

The expected loss on the portfolio can be calculated using the formula: Expected Loss = Portfolio's Beta * (Change in S&P500 Value / Current S&P500 Value). The change in S&P500 Value is 1200 - 1400 = -200. So, Expected Loss = 0.60 * (-200 / 1400) = -0.0857 or -8.57%.

You Are Given the Following Information About a Portfolio You