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 market's average return was $14\%.$ Performance is

measured using an index model regression on excess returns.

a$.$ Calculate the following statistics for each stock:

i$.$ Alpha

ii$.$ Information ratio

iii. Sharpe ratio

iv$.$ Treynor measure

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

i$.$ This is the only risky asset to be held by the investor.

ii$.$ This stock will be mixed with the rest of the investor's portfolio, currently composed

solely of holdings in the market$-$index fund.

iii. This is one of many stocks that the investor is analyzing to form an actively managed

stock portfolio.