You are the manager of a mutual fund and it is time to evaluate the performance bonus of tow of your employees Mr, Jeckyll and Mr.Hyde. 

Following  is the performance of the stocks held by Mr, Jeckyll and Mr.Hyde. over the last one year along with the betas of the stocks.

Name       Actual Returns         Beta

Jeckyl         10%                           0.50

Hyde           23%                            2.7

The Market yielded 12% in the last year and the risk free rate is 5%

a) who gets the higher bonus among the two employees?

b)At what market return would you pay the same bonus to both the employees?

Answer rating: 100% (QA)

SOLUTION a To determine which employee gets the higher bonus we need to calculate their respective r... View the full answer