Question: A portfolio manager has maintained an actively managed portfolio with a beta of 1.2. During the last year, the risk-free rate was 3% and major

A portfolio manager has maintained an actively managed portfolio with a beta of 1.2. During the last year, the risk-free rate was 3% and major equity indices performed very badly, providing returns of about 10%. The portfolio manager produced a return of 10% and claims that in the circumstances it was good. Do you agree with the portfolio manager? (Hint, what is the alpha of the portfolio?)

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