Use the Information for the Question(s) Below

question 108

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 beta of the precious metals fund with the Luther Fund is closest to:

• A) -0.3
• B) -0.6
• C) 0.3
• D) 0.6

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Definitions:

Price Wedge

The difference between the price paid by buyers and the price received by sellers, often resulting from taxes, subsidies, or other interventions in the market.

FICA

Stands for Federal Insurance Contributions Act, specific U.S. legislation that funds Social Security and Medicare through payroll taxes.

Seller Bears

Refers to situations where the seller is responsible for any additional costs or risks associated with a transaction.

FICA Tax

A U.S. federal payroll tax that funds Social Security and Medicare, contributions are made by both employees and employers.