Question

Two investment advisers are comparing performance. One averaged
a 15.46% rate of return and the other a 20.53% rate of return.
However, the *β* of the first investor was 1.5, whereas that
of the second investor was 1.

Required: Suppose that the T-bill rate was 3% and the market return during the period was 15%. Aside from the issue of general movements in the market, outline the difference between the superior and inferior portfolios.

**Answer% Do not round intermediate calculations. Input
your answer as a percent rounded to 2 decimal places (for example:
28.31%).**

Answer #1

The return on treasury bills has to be considered as a risk free rate of return and the return of these Investors are to be calculated as per Capital Asset pricing model.

Expected Return of investor A= Rf+b(Rm-Rf)

= 3+1.5(15-3)

= 21%

Expected return of investor B= 3+1(15-3)

= 15%

It can be seen that investor A has manage a rate of return of 20.53%, whereas investor B has managed a return of 15.46%.

it can be said that investor B has outperformed the expected rate of return whereas investor has not been able to outperform the expected rate of return

Two investment advisers are comparing performance. One averaged
a 16.27% rate of return and the other a 20.51% rate of return.
However, the β of the first investor was 1.5, whereas that
of the second investor was 1.
Required: Suppose that the T-bill rate was 3% and the market
return during the period was 15%. Aside from the issue of general
movements in the market, outline the difference between the
superior and inferior portfolios.
Answer% Do not round intermediate calculations....

Two investment advisers are comparing performance. One averaged
a 16.27% rate of return and the other a 20.51% rate of return.
However, the β of the first investor was 1.5, whereas that
of the second investor was 1.
Required: Suppose that the T-bill rate was 3% and the market
return during the period was 15%. Aside from the issue of general
movements in the market, outline the difference between the
superior and inferior portfolios.
Answer% Do not round intermediate calculations....

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However, the β of the first investor was 1.5, whereas that
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Required: Suppose that the T-bill rate was 3% and the market
return during the period was 15%. Aside from the issue of general
movements in the market, outline the difference between the
superior and inferior portfolios.
Answer% Do not round intermediate calculations....

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Required: Suppose that the T-bill rate was 3% and the market
return during the period was 15%. Aside from the issue of general
movements in the market, outline the difference between the
superior and inferior portfolios.
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Required: Suppose that the T-bill rate was 3% and the market
return during the period was 15%. Aside from the issue of general
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Required: Suppose that the T-bill rate was 3% and the
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general movements in the market, outline the difference between the
superior and inferior portfolios.
Answer% Do not round intermediate calculations....

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a 16.45% rate of return and the other a 19.78% rate of return.
However, the β of the first investor was 1.5, whereas that
of the second investor was 1.
Required: Suppose that the T-bill rate was 3% and the market
return during the period was 15%. Aside from the issue of general
movements in the market, outline the difference between the
superior and inferior portfolios.
Answer% Do not round intermediate calculations....

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However, the β of the first investor was 1.5, whereas that of the
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