Based on current dividend yields and expected capital gains, the expected rates of return on

portfolios A & B are $13\%$ and $17\%,$ respectively. The Beta of A is $0\mathrm{.}7$ while that of B is $1\mathrm{.}4.$ The

T$-$bill rate is currently $6\%,$ whereas expected rate of return for the S&P$500$ is $13\%.$ The

standard deviation of portfolio A is $12\%$ annually, that of B is $31\%$ and that of the S&P$500$

index is $18\%.$

If you currently hold a market$-$index portfolio, would you choose to add either A or B to

your holdings? Explain using appropriate performance evaluation metric.

If instead, you could invest in only T$-$bills and one of these portfolios which would you choose?