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.

	Stock A	Stock B
Index Model regression estimates	1%+ 1.2 (rM-rf)	2%+ 0.8 (rM-rf)
R-square	0.576	0.436
Residual standard deviation	10.3%	19.1%
Standard deviation of excess return	21.6%	24.9%

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 ricky asset to be held by the investor

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

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