NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Risk, Return and Performance of Funds
A scheme has a beta of 1.3 relative to its benchmark. If the benchmark rises by 10%, what change would be expected in the scheme, all else being equal?
The scheme would be expected to rise about 13%. A beta of 1.3 means the scheme moves 1.3 times as much as the benchmark, so a 10% market rise translates into roughly a 13% gain, with the same amplification on the downside.
- ARise of about 13%Correct
- BRise of about 7.7%
- CRise of about 10%
- DRise of about 3%
Explanation
Beta measures sensitivity to market movements. Expected change = 1.3 × 10% = 13%. Dividing 10 by 1.3 gives 7.7%, which inverts the relationship. A beta of 1 would give 10%.
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