Problem 4: (10 points)

Two investment advisers are comparing performance. One averaged a 16% rate of return and the other a 13% rate of return. However, the beta of the first investor was 1.6, whereas that of the second investor 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)? (Please circle)

Cannot determine

First Investor

Second Investor b. If the T-bill rate was 8% and the market return during the period was 10%, which investor would be considered the superior stock selector? (Please show all the calculations)

Cannot determine

First Investor

Second Investor