Problem 7-03 You are an analyst for a large public pension Fund and you have been assigned the task of evaluating two different external portfolio managers (Yand 2). You consider the following historical average return, standard deviation, and CAPM beta estimates for these two managers over the past five years Portfolio Actual Avg. Return Standard Deviation Beta Manager Y 11.40 1.10 Manager 2 6.30% 8.50% 0.70 Additionally, your estimate for the risk premium for the market portfolio is 4.00 percent and the risk-free rate is currently 4.50 percent. a. For both Manager Y and Manager 2, calculate the expected return using the CAPM. Round your answers to two decimal places Manager : Manager Z: b. Calculate each fund manager's average alpha (ie, actual return minus expected return) over the five-year holding period. Round your answers to two decimal places Manager Y: Manager 2: Choose the correct SML graph. The correct graph is-Sect . Security market Line E(RI) 0121 017 Alpay 0.001 0.001 0.047 021 Trong 2 taon as ao eta Security market Line ERO 0.127 0.06+ 0.02 Security market Line E(R) 0.12 0.17 0.087 - 0.8 0.6 0.4 0.2 0.2 0.4 0.6 0.8 0.2 0.4 0.6 T 12 14 16 Beta Security market Line E(RI) Rm 0.087 0.067 D.04+ 0.02+ 1 .0.8 0.6 0.4 0.2 0.2 0.4 0.6 0.8 i 1.2 1.4 1.6 Beta c. Explain whether you can conclude from the information in Part bif: 1. either manager outperformed the other on a risk-adjusted basis. - Select outperformed the -Select- on a risk-adjusted basis. 2. either manager outperformed market expectations in general. Manager Y Select market expectations in general. Manager Z -Select market expectations in general