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(Jensen's alpha) Thomas manages an investment firm. His firm's investments have beta of 0.7 . The market risk premium is 6%, and the risk-free rate

image text in transcribed (Jensen's alpha) Thomas manages an investment firm. His firm's investments have beta of 0.7 . The market risk premium is 6%, and the risk-free rate in the economy is 2%. Thomas presents you the following offer: "Let me manage your portfolio and I'll provide an annual return of 7\% (this return is gross, i.e., before management fees). I'll only charge management fees of 1%." Would you take his investment offer

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