You Are Given the Following Information About a Portfolio You

question 3

Multiple Choice

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. $$\begin{array} { | l | l | } \hline \text { Portfolio Value } & \$ 1 \text { million } \\\hline \text { Portfolio's Beta } & 0.60 \\\hline \text { Current S\&P500 Value } & 1400 \\\hline \text { Anticipated S\&P500 Value } & 1200 \\\hline\end{array}$$
-For a 200-point drop in the S&P500,by how much does the value of the futures position change?

• A)$200,000
• B)$50,000
• C)$250,000
• D)$500,000
• E)$100,000

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Definitions:

Equity Investment

Money that is invested in a company by purchasing shares of that company, typically with the expectation of income from dividends and capital gains as the stock appreciates.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, usually with a fixed dividend.

Corporate Bond

A type of debt security issued by corporations to raise capital, with the obligation to pay back the principal along with interest.

Interest Rates

The percentage charged on a loan or earned through an investment, typically expressed annually as a fraction of the principal.