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 S\&P500 Value } & 1200 \

\end{array}$$ What is the dollar value of your expected loss?
A) $142,900
B) $16,670
C) $85,700
D) $30,000
E) $64,200

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 S\&P500 Value } & 1200 \

\end{array}$$ What is the dollar value of your expected loss?
A) $142,900
B) $16,670
C) $85,700
D) $30,000
E) $64,200

Quizplus · Accepted Answer

The expected loss is calculated by the change in the S&P500 value multiplied by the portfolio's beta and the portfolio value. The change in S&P500 is 1400 - 1200 = 200. The expected loss = 0.60 * (200/1400) * $1,000,000 = $85,714, which is closest to $85,700.

You Are Given the Following Information About a Portfolio You