Suppose you know the following information about two stocks:

Stock

Average Monthly Return

Annualized Risk$-$Free Rate

Beta

A $0\mathrm{.}9\%0\mathrm{.}3\%1\mathrm{.}3$

B $0\mathrm{.}8\%0\mathrm{.}3\%1$

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 stock$$s 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:

$0\mathrm{.}2308$

$0\mathrm{.}3231$

$0\mathrm{.}4615$

$0\mathrm{.}9231$

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

$0\mathrm{.}3$

$0\mathrm{.}4$

$0\mathrm{.}5$

$1\mathrm{.}05$

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

Stock A

Stock B