Suppose an FI Holds a $2 000 000 Trading Portfolio $\times$

question 32

Multiple Choice

Suppose an FI holds a $2 000 000 trading portfolio with an average beta of 1.0. Over the last year, the daily return on the stock market index was 3 per cent. How much does the FI stand to lose in earnings if adverse stock market returns materialise tomorrow?

• A) $2 000 000 \(\times\) 0.03 = $60 000
• B) $2 000 000 \(\times\) 1.0 \(\times\) 0.03 = $60 000
• C) $2 000 000 \(\times\) 1.65 \(\times\) 0.03 = $99 000
• D) $2 000 000 \(\times\) 2.33 \(\times\) 0.03 = $139 800

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