Consider the two (excess return) index-model regression results for stocksAandB. The risk-free rate over the period was 8%, and the market's average return was 13%. Performance is measured using an index model regression on excess returns.

StockAStockBIndex model regression estimates1% + 1.2(r_M-r_f)2% + .8(r_M-r_f)R-square0.6590.478Residual standard deviation, (e)11.7%20.5%Standard deviation of

excess returns23%27.7%

a.Calculate the following statistics for each stock:(Round your answer to 4 decimal places. Omit the "%" sign in your response.)

Stock AStock Bi.Alpha%%ii.Information ratio iii.Sharpe measure 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.

(Click to select)

Stock A

Stock B

ii.This stock will be mixed with the rest of the investor's portfolio, currently composed solely of holdings in the market index fund.

(Click to select)

Stock A

Stock B

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

(Click to select)

Stock B

Stock A