Problem 1. [8 pts] Mr. Ota is an analyst for a large pension fund and he has been assigned the task of evaluating two different external portfolio managers (K and C). He considers the following historical average return, standard deviation, and CAPM beta estimates for these two managers over the past five years: Portfolio Actual Average Standard deviation Beta Return Manager K 7.80% 10.05% 0.75 Manager C 12.0% 15.50% 1.45 Additionally, Mr. Ota estimate for the risk premium for the market portfolio is 5.40% and the risk-free rate is currently 2.50%. a. For both Managers K and C, calculate the expected return using the CAPM. Express your answers to the nearest basis point (i.e., xx.xx%) b. Calculate each fund manager's average alphas (i.e., actual return minus expected return) over the five-year holding period. How graphically where these alpha statistics would plot on the security market line (SML). c. Explain whether you can conclude from the information in Part b. if (i) either manager outperformed the other on a risk-adjusted basis, and (ii) either manager outperformed market expectations in general