You are a portfolio manager with two investment advisers(Mike andSara) working under you. For theyear-end performancereviews, you need to assess their performances. Mike averaged a20% return with a portfolio beta of1.5, and Sara averaged a15% return with a portfolio beta of 1.2. Assume theT-bill rate was5% and the market return during the period was13%, which one was the better stock picker(Mike orSara)?

A.

Mike was better because he generated a larger alpha.

B.

Mike was better because he generated a higher return.

C.

It is hard to compare their performances because the two portfolios have different betas.

D.

Sara was better because she achieved a good return with a lower beta.

E.

Sara was better because she generated a larger alpha.