NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Risk, Return and Performance of Funds
A scheme has a beta of 1.2. If the market index falls by 10%, what fall would be expected in the scheme's value, based on beta alone?
The scheme would be expected to fall by about 12%. Beta of 1.2 means the scheme moves 1.2 times the market, so a 10% market fall translates into a 1.2 x 10 = 12% fall in the scheme, ignoring other factors.
- A8.33%
- B10%
- C12%Correct
- D1.2%
Explanation
Beta measures sensitivity to market movements. Expected change = 1.2 x 10% = 12% fall. Dividing 10 by 1.2 gives 8.33%, which inverts the relationship. The 10% figure assumes a beta of 1.
Did you get it right without looking?
One question tells you little. A timed set on Risk, Return and Performance of Funds shows your real accuracy, how long you take and where you lose marks.
More Risk, Return and Performance of Funds questions
- A fund earned a return of 14% in a year. The risk-free rate is 6%, the fund's standard deviation is 16% and its beta is 0.8. What is the fun…
- A scheme has a beta of 1.2 relative to its benchmark. If the benchmark rises by 10%, what is the scheme's expected movement, all else equal?
- Fund A has a standard deviation of 18% and Fund B has a standard deviation of 12%, both over the same period and with similar objectives. Wh…
- Which of the following best describes 'standard deviation' when used to assess a mutual fund scheme?
- An investor puts Rs 1,00,000 in a scheme which grows to Rs 1,21,000 after exactly two years with no interim payouts. What is the compounded …
- A scheme returned 18% in a year while its benchmark index returned 15%. Its beta relative to the benchmark is 1.2. What does a beta of 1.2 i…