Use the Information for the Question(s)below

question 65

Multiple Choice

Use the information for the question(s) below.
You are presently invested in the Luther Fund,a broad-based mutual fund that invests in stocks and other securities.The Luther Fund has an expected return of 14% and a volatility of 20%.Risk-free Treasury bills are currently offering returns of 4%.You are considering adding a precious metals fund to your current portfolio.The metals fund has an expected return of 10%,a volatility of 30%,and a correlation of -.20 with the Luther Fund.
-The required return on the precious metals fund is closest to:

• A)-3%.
• B)4%.
• C)1%.
• D)10%.

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Definitions:

Marginal Analysis

The study of marginal decisions.

Marginal Cost

The additional cost incurred in producing one more unit of a good or service, crucial for decision-making about production levels.

Learning Effects

These are reductions in production costs that occur due to learning and improving over time, as processes become more efficient with experience.

Marginal Costs

The increase in total cost that arises from an extra unit of production.