A Mutual Fund with a Beta of 1

question 64

Multiple Choice

A mutual fund with a beta of 1.1 has outperformed the S&P500 over the last 20 years.We know that this mutual fund manager _______________________.

• A) must have had superior stock selection ability
• B) must have had superior asset allocation ability
• C) must have had superior timing ability
• D) may or may not have outperformed the S&P500 on a risk adjusted basis

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Definitions:

Complement

A good whose demand increases when the price of another good decreases. Examples include a parking lot and shopping mall or a hamburger and a hamburger bun.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded by consumers at various price levels.

Normal Good

A type of good for which demand increases as the income of the consumer increases, reflecting a direct relationship between income and demand.

Inferior Good

A type of good whose demand decreases as the consumer's income increases, opposite to normal goods.