Q.) Use the Modigliani measure to derive an estimate of what each money manager's return should have been given the amount of risk taken.

4. Nick Baker is considering hiring a money manager to manage a portion of his sizable portfolio. He has narrowed his choices to the following money management firms. Each firm's historical mean return, portfolio standard deviation, and the risk free rate is shown below: Benchmark Manager 2 Manager 3 Manager 4 Manager 5 Mean 9.52% 16.00% 9.20% 18.00% 7.00% Standard Deviation 10.65% 15.00% 5.60% 25.00% 6.00% Risk-Free Rate 3.50% 3.50% 3.50% 3.50% 3.50%. M2 = [RF + OM R -Rf oi . WHERE RF = RISK FREE RATE RI = RETURN OF PORTFOLIO ASSETS I'M = STANDARD DEVIATION OF MARKET OR BENCHMARK of = STANDARD DEVIATION OF ASSET RM = RETURN ON THE MARKET