Suppose you know the following information about two stocks:

Stock	Average Monthly Return	Annualized Risk-Free Rate	Beta
A	1.1%	0.6%	1.2
B	1.4%	0.6%	1.1

Based on the information in the table, which stock has a higher return?

Stock A

Stock B

Based on the information in the table, which stock has a higher level of risk?

Stock A

Stock B

There are several ways in which investors can measure a stocks risk. One is to examine the volatility of stock returns by using the Treynor index.

Based on the information in the table, the Treynor index for stock A is:

0.2083

0.4167

0.625

0.8333

Based on the information in the table, the Treynor index for stock B is:

0.4364

0.7273

0.9455

1.5273

Based on the Treynor ratios, which stock offers more expected excess return per unit of risk?

Stock A

Stock B