Question

Mutual fund XYZ has a 5-year return of 12%, with a standard deviation of 15%. Fund XYZ has a Beta of 1.4, with a correlation of .90 to the S&P. What Percent of the return from fund XYZ is due to the S&P?

A. 90%
B. 81%
C. 19%
D. 10%

Answer 1

To find the percentage of the return from fund XYZ that is due to the S&P, we need to calculate the beta coefficient and multiply it by the correlation coefficient. The correct answer is Option B. 81%.

Step-by-step explanation:

To find the percentage of the return from fund XYZ that is due to the S&P, we need to calculate the beta coefficient. The formula to calculate the beta coefficient is:

Beta = Covariance(stock XYZ, S&P) / Variance(S&P)

Then, we multiply the beta coefficient by the correlation coefficient to find the percent of the return due to the S&P. With a beta of 1.4 and a correlation of 0.90, the percent of the return from fund XYZ that is due to the S&P is 81%. Therefore, the correct answer is Option B. 81%.