Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 5%, and the markets average return was 13%. Performance is measured using an index model regression on excess returns.

	Stock A	Stock B
Index model regression estimates	1% + 1.2(rM rf)	2% + 0.8(rM rf)
R-square	0.605	0.451
Residual standard deviation, (e)	10.8%	19.6%
Standard deviation of excess returns	22.1%	25.9%

a. Calculate the following statistics for each stock: (Round your answers to 4 decimal places.)

1. Alpha for Stock A and B

2. information ratio for Stocks A and B

3. Sharpe ratio for stocks A nd B

4. Treynor measure for Stocks A and B

3.

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