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. $$\begin{array} { | l | l | }
\hline \text { Portfolio Value } & \$ 1 \text { million } \
\hline \text { Portfolio's Beta } & 0.86 \
\hline \text { Current S\&P500 Value } & 990 \
\hline \text { Anticipated S\&P500 Value } & 915 \
\hline
\end{array}$$
-If the anticipated market value materializes,what will be your expected loss on the portfolio?
A)7.58%
B)6.52%
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. $$\begin{array} { | l | l | } 
\hline \text { Portfolio Value } & \$ 1 \text { million } \
\hline \text { Portfolio's Beta } & 0.86 \
\hline \text { Current S\&P500 Value } & 990 \
\hline \text { Anticipated S\&P500 Value } & 915 \
\hline
\end{array}$$
-If the anticipated market value materializes,what will be your expected loss on the portfolio?
A)7.58%
B)6.52%
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 * (Anticipated S&P500 Value - Current S&P500 Value) / Current S&P500 Value. Plugging in the values: 0.86 * (915 - 990) / 990 = -0.0652 or -6.52%.

You Are Given the Following Information About a Portfolio You