Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Two investment advisers are comparing performance. One averaged a 19% rate of return
and the other a 16% rate of return. However, the beta of the first investor was 1.5, whereas
that of the second was 1.
a) Can you tell which investor was a better selector of individual stocks (aside from the
issue of general movements in the market)?
b) If the T-bill rate were 6% and the market return during the period were 14%, which
investor would be the superior stock selector?
c) What if the T-bill rate were 3% and the market return were 15%?
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