Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 8%, and the markets average return was 13%. Performance is measured using an index model regression on excess returns.

	Stock A	Stock B
Index model regression estimates	1% + 1.2(rM rf)	2% + .8(rM rf)
R-square	0.659	0.478
Residual standard deviation, (e)	11.7%	20.5%
Standard deviation of excess returns	23%	27.7%

a.	Calculate the following statistics for each stock: (Round your answer to 4 decimal places. Omit the "%" sign in your response.)

		Stock A		Stock B
i.	Alpha		%		%
ii.	Information ratio
iii.	Sharpe measure
iv.	Treynor measure

b.	Which stock is the best choice under the following circumstances?

i.	This is the only risky asset to be held by the investor.	(Click to select) Stock A Stock B
ii.	This stock will be mixed with the rest of the investors portfolio, currently composed solely of holdings in the market index fund.	(Click to select) Stock A Stock B
iii.	This is one of many stocks that the investor is analyzing to form an actively managed stock portfolio.	(Click to select) Stock B Stock A