According to the given information, the expected return for the mutual fund is 8.73%.
In the given question, in advising a client you are considering adding a mutual fund, fundsrus, to the client's portfolio of investments.
The fund has a beta coefficient of 1.35.
The return on an average risk security in the market is 7.5%.
The risk-free rate is 4%.
We have to find the expected return for the mutual fund fundsrus.
As we know that;
Asset management firms (AMCs) that handle mutual funds in a professional manner on behalf of individual investors.
Expected return for the mutual fund = Risk Free+Beta×(Market Return-Risk Free)
Expected return for the mutual fund = 4+1.35×(7.5-4)
Expected return for the mutual fund = 8.73%
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