Exercise

Portfolio losses and gaining it back

First, let's develop our intuition for returns. Did you know that when your portfolio copes with losses, it takes a lot of time to get back to the original level of wealth? Because we are dealing with percentage increases and decreases, these changes are not linear in magnitude. Suppose you invest $1000 on day 1 in a portfolio, and it loses 50% in that first day. So that means on day 2, you start with a portfolio value of $500.

So after a loss of 50%, what should the percentage return on day 2 be to get back to the initial investment value of $1000? Use the console to check your answer.

Instructions

50 XP

Possible Answers

50%
75%
100%
200%

Take Hint (-15 XP)