Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 4%, and the markets average return was 13%. Performance is measured using an index model regression on excess returns.

Problem 24-9 Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 4%, and the market's average return was 13%. Performance is measured using an index model regression on excess returns. 10 points Stock A Stock B 1% + 1.2(RM - rf) 2% + 0.8(rm - rf) 0.695 0.496 12.3% 21.1% Index model regression estimates R-square Residual standard deviation, ole) Standard deviation of excess returns eBook 23.6% 28.9% a. Calculate the following statistics for each stock: (Round your answers to 4 decimal places.) 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? This is the only risky asset to be held by the investor. This stock will be mixed with the rest of the investor's portfolio, currently composed solely of holdings in the market-index fund. This is one of many stocks that the investor is analyzing to form an actively managed stock portfolio