1. There are two mutual fund managers. Manager 1 earned 15% in the past year, whereas manager 2 earned 10% in the past year. The beta of the first manager is 1.1, whereas the beta for the second manager is 0.8. Assume CAPM is the correct model. Which manager is a better stock selector (i.e. who performed better on a risk-adjusted basis)?

2. There are two mutual fund managers. Manager 1 earned 18% in the past year, whereas manager 2 earned 7% in the past year. The beta of the first manager is 2.1, whereas the beta for the second manager is 0.9. Assume the expected market risk premium is 12% and the risk-free rate is 5%. Assume CAPM is the correct model. Which manager is a better stock selector (i.e. who performed better on a risk-adjusted basis)?

3. A discount bond has a quoted yield to maturity of 10% and a par amount of $1000. What do you know about a) the price of the bond, and b) the coupon?