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 c }
\text { Portfolio Value } & \$ 1 \text { milion } \
\text { Portfolio's Beta } & 0.60 \
\text { Current S\&P500 Value } & 1400 \
\text { Anticipated SEP500 Value } & 1200 \

\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 c } 
\text { Portfolio Value } & \$ 1 \text { milion } \
\text { Portfolio's Beta } & 0.60 \
\text { Current S\&P500 Value } & 1400 \
\text { Anticipated SEP500 Value } & 1200 \

\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 1400 - 1200 = 200. Therefore, Expected Loss = 0.60 * (200 / 1400) = 0.0857 or 8.57%.

You Are Given the Following Information About a Portfolio You