Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate...

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Consider the two (excess return) index-model regression resultsfor stocks A and B. The risk-free rate over theperiod was 6%, and the market’s average return was 15%. Performanceis measured using an index model regression on excess returns.
Stock A Stock B
Index model regression estimates 1% + 1.2(r_M ? r_f) 2% + 0.8(r_M ? r_f)
R-square 0.594 0.445
Residual standard deviation, ?(e) 10.6% 19.4%
Standard deviation of excess returns 21.9% 25.5%
a. Calculate the following statistics for eachstock: (Round your answers to 4 decimalplaces.)
b. Which stock is the best choice under thefollowing circumstances?

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Consider the two (excess return) index-model regression resultsfor stocks A and B. The risk-free rate over theperiod was 6%, and the market’s average return was 15%. Performanceis measured using an index model regression on excess returns.Stock AStock BIndex model regression estimates1% + 1.2(rM ? rf)2% + 0.8(rM ? rf)R-square0.5940.445Residual standard deviation, ?(e)10.6%19.4%Standard deviation of excess returns21.9%25.5%a. Calculate the following statistics for eachstock: (Round your answers to 4 decimalplaces.)b. Which stock is the best choice under thefollowing circumstances?

	Stock A	Stock B
Index model regression estimates	1% + 1.2(r_M ? r_f)	2% + 0.8(r_M ? r_f)
R-square	0.594	0.445
Residual standard deviation, ?(e)	10.6%	19.4%
Standard deviation of excess returns	21.9%	25.5%