Use the Information for the Question(s) Below

question 78

Multiple Choice

Use the information for the question(s) below.
You are presently invested in the Luther Fund, a broad based mutual fund that invest 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:

Egocentric Thought

A cognitive stance where an individual is unable to differentiate between their own perspective and that of others, common in early childhood development.

Concrete Operational Thought

A stage in Jean Piaget's theory of cognitive development where children aged 7 to 11 years start to understand logical operations and are no longer fooled by appearances.

Logical Operations

The mental processes involved in reasoning and understanding complex concepts through logical thought.

Reasoning

The process of thinking about something in a logical way to form a conclusion or judgment.