Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate of return over the period was 6% and the markets average return was 14%. Performance is measured using an index model regression on excess return.

	Stock A	Stock B
Index model regression estimates	1%+ 1.2(Rm-Rf)	2%+ 0.8(Rm-Rf)
R-square	0.576	0.436
Standard deviation (tracking error)	10.3%	19.1%
Standard deviation of excess return	21.6%	24.9%

1) The Sharp/Reward Volatility ratio for stocks A and B;

2) What proportion of the variation in the return of each stock is explained by the movements in the market?

Select one:

i. 0.576 & 0.436

ii. 0.103 & 0.191

iii. 0.01 & 0.02

iv. none of the above

3. The risk premium of each stock is, i. 0.106 & 0.084

ii. 0.096 &0.064

iii. 0.01 &0.02

iv. 0.08 &0.08

4.The market risk premium of each stock is

5. The active return of each stock is,

6. The active risk of each stock is

7. The excess return of each stock is

8.Which is the best choice if stock will be mixed with the rest of the investors portfolio, currently composed solely of holdings in the market index fund?