The following table shows risk and return measures for two portfolios
Portfolio Average Annual Standard Beta
Rate of Return Deviation
Fund A 12% 10% 0.25
S&P 500 index 16% 12% 1.0
T-bills 8% 0 0
a. Plot fund A, the market portfolio and risk-free asset on a graph relative to the SML. Is the fund correctly priced? Explain why.
b. Plot fund A, the market portfolio and risk-free asset on a graph relative to the CML. Between fund A and the market portfolio, which one is more efficient in terms of its sharp ratio?