Two investment professionals are comparing their return performance. The first professional managed portfolios with an average return of 15% and the second professional managed portfolios with a 12% rate of return. The beta of the first portfolio was 1.2 while the beta of the second was 1.0. The risk-free rate of return was 2% and the expected market return is 10%.

1. [5 points] Which manager was a better selector of individual stocks, and why?

2. [2 points] Plot both of the portfolios on the security market line.