Consider the two (excess return) index-model regression results for stocks Aand B.The risk-free rate over the period was 6%, and the markets 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 measure

iv. Treynor measure

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

\begin{tabular}{lcc} \hline Index model regression estimates & Stock A & Stock B \\ R-square & 0.1.2(rMrf) & 2%+0.8(rMrf) \\ Residual standard deviation, s(e) & 10.3% & 0.436 \\ Standard deviation of excess returns & 21.6% & 19.1% \\ & 24.9% \end{tabular}