Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 6%, 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% + 0.8(rM rf)
R-square	0.588	0.442
Residual standard deviation, (e)	10.5%	19.3%
Standard deviation of excess returns	21.8%	25.3%

a. Calculate the following statistics for each stock (use whole percent values, 1%, not 0.01 for example, for your calculations): (Round your answers to 4 decimal places.)

i. Alpha (For stock A and B)

ii. Information Ratio (For stock A and B)

iii. Sharpe Ratio (For stock A and B)

iv. Treynor Measure (For stock A and B)

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

i. This is the only risky asset to be held by the investor (Stock A or B)

ii. This stock will be mixed with the rest of the investor's portfolio, currently composed solely of holdings in the market-index fund. (Stock A or B)

iii. This is the one of many stocks that the investor is analyzing to form an actively managed stock portfolio. (Stock A or B)