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2) An investment advisor is comparing performance of two mutual funds each of which is designed to outperform the S&P 500. The Freedelity Fund returned

2) An investment advisor is comparing performance of two mutual funds each of which is designed to outperform the S&P 500.

The Freedelity Fund returned 19%

The JPStanley Fund returned 16%.

The betas of the Freedelity & JPStanley funds are 1.5 & 1.0 respectively.

T-Bill rate = 6%; and the S&P 500 returned 14%.

Using CAPM, Which fund was the superior performer? Why?

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