A Friend Tells You About a Mutual Fund Called the Global

question 21

Multiple Choice

A friend tells you about a mutual fund called the Global Asset Fund. The fund's expected return and beta for next year are shown in the table below. The expected return and beta of the risk free asset and the market portfolio are also shown in the table. Consider an alternative investment strategy of investing in a portfolio on the Security Market Line with the same beta as the Global Asset Fund. What return should you expect to earn from that portfolio? $$\begin{array} { | c | c | c | } \hline \text { Asset } & \begin{array} { c } \text { Expected } \\\text { Return }\end{array} & \text { Beta } \\\hline \text { Risk-Free } & 5.5 \% & 0 \\\hline \begin{array} { c } \text { Market } \\\text { Portfolio }\end{array} & 11.5 \% & 1 \\\hline \begin{array} { c } \text { Global Asset } \\\text { Fund }\end{array} & 16 \% & 1.59 \\\hline\end{array}$$

• A)12%
• B)13%
• C)14%
• D)15%
• E)16%

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Definitions:

Materials Requisitioned

The act of asking for and taking out items from stock for the purpose of manufacturing or utilization.

Raw Materials Issued

The total raw materials moved from inventory for use in production.

Labor Time Tickets

Documents used to track the amount of time an employee spends on different tasks, facilitating accurate labor cost allocation.

Supervision

The act of overseeing work performance and activities to ensure that goals are met and policies are followed.