Fund A has an expected rate of returns of 15% and a market beta of 1.5. Fund B has an expected rate of returns of 19.5% and a market beta of 2.

(a) Can you tell which fund has better performance? (Hints: If you are not sure about the answer, you may want to answer this question after you solve the questions (b) and (c) below).

(b) The risk-free rate is 2% and the expected return on the market portfolio is 10%. Which fund has better performance?

(c) What if the risk-free rate is 2% and the expected return on the market portfolio is 12%?