6: The following information describes the expected return and risk relationship for the stocks of two of CMs competitors:

Stock	Expected return	Standard deviation	Beta
A	12.0%	20.0%	1.3
B	9.0%	15.0%	0.7
Market index	10.0%	12.0%
Risk-free rate	5.0%

Using the data shown above:

Draw and label a graph showing the Security Market Line, and position stocks A and B relative to it.

Compute the alphas of both stocks A and B. Determine which of the two stocks is the better performer.

Assume that the risk-free rate increases to 7.0% with the other data in the matrix above remaining unchanged. Using the Sharpe, Jensen and Treynor measures, select the stock providing the higher expected risk-adjusted return and justify your selection.