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VI. Fund A has an expected rate of returns of 10% and a market beta of 1.5. Fund B has an expected rate of returns
VI. Fund A has an expected rate of returns of 10% and a market beta of 1.5. Fund B has an expected rate of returns of 15% and a market beta of 1.5. (a) Can you tell which fund has better performance? (A tricky question) (5 points) (b) The risk-free rate is 2% and the expected return on the market portfolio is 10%. Which fund has better performance? (2 points) (c) What if the risk-free rate is 4% and the expected return on the market portfolio is 10%? (2 points)
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