Question 14

The table below gives performance forecasts for two famous hedge funds: Black Rock and Paulson. It also shows the expected market return and the risk free rate.

	Black Rock	Paulson	Market	Risk free
Expected Return	30%	20%	10%	1%
Standard Deviation	60%	24%	10%	0
Beta	4	2	1	0

Which fund is expected to perform the best relative to the CAPM?

	a.	Black Rock because it has a very large expected return
	b.	Black Rock because it has the highest alpha
	c.	Black Rock because it has a large beta
	d.	Paulson because it has the highest alpha
	e.	Both funds are expected to perform equally well