The Following Information Is to Be Used to Answer Questions

question 13

Multiple Choice

The following information is to be used to answer questions 13-17.
$\begin{array}{llcc}\underline{ \text { SD }} &\underline{ \text {Beta }}&\underline{ \text {alpha }}&\underline{ \text { \(\mathrm{R}^{2}\) }} \\ \text { Fund 11.97 } &1.0&1.3&0.95\\ \text { Fund 22.94 } &0.8&0.6^*&0.80\\ \text { Fund 33.82} &1.2&-3.5&0.90\\ \text { Fund 44.70 } &1.4&4.2&065\\ &\\\end{array}$
$\text { *Significant at the } 5 \text { percent level }$
-Which of the funds' returns are best explained by the market's returns?

• A) Fund 1 Solution: Fund 1 has highest R².
• B) Fund 2
• C) Fund 3
• D) Fund 4

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Definitions:

Percentage Increase

calculates the rate at which a quantity grows over a period, expressed as a fraction of its original value.

Elastic

Describes a scenario where a small change in price leads to a large change in quantity demanded or supplied.

Inelastic

describes a situation where the demand or supply for a good is not significantly affected by changes in price.

Relatively Elastic

Describes a situation where demand for a product is sensitive to changes in its price, meaning consumers will significantly reduce or increase their demand based on price changes.