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 15%. 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% + 0.8(rM - rf)
R-square	0.671	0.484
Residual standard deviation, o(e)	11.9%	20.7%
Standard deviation of excess returns	23.2%	28.1%

a. Calculate the following statistics for each stock:

		Stock A	Stock B
i.	Alpha	?%	?%
ii.	Information ratio	?	?
iii.	Sharpe ratio	?	?
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	?
ii.	This stock will be mixed with the rest of the investor's portfolio, currently composed solely of holdings in the market-index fund.	?
iii.	This is one of many stocks that the investor is analyzing to form an actively managed stock portfolio.	?