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Which manager has produced superior returns

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Reference no: EM132967934

Suppose you evaluating an investment manager. Manager A has achieved a historical return of 20% per year with a beta (with respect to a benchmark) of 1.4, and volatility of 40%. Manager B has achieved a historical return of 15% per year, beta of 1.0 and volatility of 20% per year.

The benchmark return has been 16% per year, and the risk-free rate is 6%. Volatility of the benchmark is 20% per year.

Problem a) According to Sharpe Ratio, which manager has produced superior returns?

A) Manager A
B) Manager B
C) No idea

Problem b) According to a, which manager has produced superior returns?

A) Manager A
B) Manager B
C) No idea

Problem c) Draw the total risk (standard deviation) - reward (expected return) trade-off. Be sure to mark/draw the risk-free rate, the market portfolio, the mean-variance frontier, manager A and manager B.

Reference no: EM132967934

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