The following table summarizes the return and risk of an actively managed portfolio P and the market portfolio M:

Summary of Portfolio Performance

Active Portfolio P Market Portfolio M

Average return 11%12%

Beta 0.81.0

Standard deviation 17%21%

The T-bill (risk-free) rate is 1%.

a.Compute the Sharpe ratios for P and M.

b.If you must choose only one portfolio among P and M, which portfolio should you choose? Briefly explain why.

c.Compute the Treynor ratios for P and M.

d.Calculate Jensen's alpha for P.

e.The estimated residual variance of P is 0.0036. What is the information ratio for P?