NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Risk, Return and Performance of Funds
A fund has a beta of 1.2. If the market index rises by 10%, what change would the fund be expected to show, based on beta alone?
The fund is expected to rise about 12%. Beta of 1.2 means the fund moves 1.2 times the market, so a 10% market gain translates into roughly 12% for the fund, ignoring other factors.
- A8.33%
- B10%
- C12%Correct
- D1.2%
Explanation
Beta measures sensitivity to market movements. Expected change = 1.2 x 10% = 12%. Dividing 10 by 1.2 gives 8.33%, which inverts the relationship.
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