A friend tells you about a mutual fund called the Global Asset ...

[roselinechinyere27m]

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?
 
  Asset Expected Return Beta
  Risk-Free 5.5 0
  Market Portfolio 11.5 1
  Global Asset Fund 16 1.59
 
  A) 12
  B) 13
  C) 14
  D) 15
  E) 16

Question 2

When considering expected returns, what is true about the states of the world?
 
  A) They must have probabilities that sum to 100.
  B) They represent all possible outcomes.
  C) They are sometimes simplified into outcomes such as boom, bust, and normal.
  D) Statements A through C are all true.

[diana chang]

Answer to Question 1

D

Answer to Question 2

Answer: D

[roselinechinyere27m]

Excellent

[Jossy]

Gracias!