You have invested only in the BlueChip Fund, a mutual fund that invests mainly in stocks. At the moment, the BlueChip Fund has an expected return of 14% and a volatility of 36%. Your broker suggests you to consider adding the Platinum Fund to your current portfolio. The Platinum Fund has an expected return of 8%, a volatility of 24%, and a correlation of 0.25 with the BlueChip Fund. Risk-free interest rate is equal to 3%. The difference between the expected return and the required return on the Platinum Fund is closest to: -0.005 0.134 0.032 0.210
You have invested only in the BlueChip Fund, a mutual fund that invests mainly in stocks. At the moment, the BlueChip Fund has an expected return of 14% and a volatility of 36%. Your broker suggests you to consider adding the Platinum Fund to your current portfolio. The Platinum Fund has an expected return of 8%, a volatility of 24%, and a correlation of 0.25 with the BlueChip Fund. Risk-free interest rate is equal to 3%. The difference between the expected return and the required return on the Platinum Fund is closest to: -0.005 0.134 0.032 0.210
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN:9781337117005
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter13: Investing In Mutual Funds, Etfs, And Real Estate
Section: Chapter Questions
Problem 8FPE
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![QUESTION 13
You have invested only in the BlueChip Fund, a mutual fund that invests mainly in stocks. At the moment, the BlueChip Fund has an
expected return of 14% and a volatility of 36%. Your broker suggests you to consider adding the Platinum Fund to your current
portfolio. The Platinum Fund has an expected return of 8%, a volatility of 24%, and a correlation of 0.25 with the BlueChip Fund.
Risk-free interest rate is equal to 3%. The difference between the expected return and the required return on the Platinum Fund is
closest to:
O -0.005
0.134
0.032
0.210](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdceabba7-44c5-4f5a-b9e5-dab34adb1650%2F980f2eed-0220-40c5-90f1-c0dbac271e91%2Fbkhzjd_processed.jpeg&w=3840&q=75)
Transcribed Image Text:QUESTION 13
You have invested only in the BlueChip Fund, a mutual fund that invests mainly in stocks. At the moment, the BlueChip Fund has an
expected return of 14% and a volatility of 36%. Your broker suggests you to consider adding the Platinum Fund to your current
portfolio. The Platinum Fund has an expected return of 8%, a volatility of 24%, and a correlation of 0.25 with the BlueChip Fund.
Risk-free interest rate is equal to 3%. The difference between the expected return and the required return on the Platinum Fund is
closest to:
O -0.005
0.134
0.032
0.210
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