Consider the two (excess return) index-model regression results for equities funds 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% + .8(rM – rf)
R-square 0.683 0.49
Residual standard deviation, σ(e) 12.1% 20.9%
Standard deviation of excess returns 23.4% 28.5%
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?
i. This is the only risky asset to be held by the investor.
ii. This stock will be mixed with the rest of the investor’s portfolio, currently composed solely of holdings in the market index fund.
iii. This is one of many stocks that the investor is analyzing to form an actively managed stock portfolio.

Joshua is a millionaire, and he manages several successful companies. he usually interacts with people of similar status. given this information, joshua and the people he interacts with are part of a

Peninsula products has just applied for a loan at your bank. when reviewing peninsula's books for the year that just ended, you notice that the firm uses the fair value option for its bonds payable. you also see that the firm recorded a $55,000 debit in its bonds payable account and a $55,000 credit in its unrealized holding gain or loss"income account. over that same period, interest rates decreased by about 0.5 percent. how should this information affect the bank's decision as to whether to grant peninsula a loan? a : the bank should strongly consider giving a loan to peninsula because the changes in firm's bonds payable and unrealized holding gain or loss"income accounts suggest that peninsula has seen an increase in its credit rating over the past year. b : the bank should put little emphasis on the changes in peninsula's bonds payable and unrealized holding gain or loss"income accounts because these changes are likely the result of the rise in interest rates. c : the bank should hesitate before giving a loan to peninsula because the changes in firm's bonds payable and unrealized holding gain or loss"income accounts suggest that peninsula has seen a decline in its credit rating over the past year. d : the bank should put little emphasis on the changes in peninsula's bonds payable and unrealized holding gain or loss"income accounts because these changes are likely unrelated to either interest rates or the firm's credit rating.

1. descriptive statistics quickly describe large amounts of data can predict future stock returns with surprising accuracy statisticians understand non-numeric information, like colors refer mainly to patterns that can be found in data 2. a 15% return on a stock means that 15% of the original purchase price of the stock returns to the seller at the end of the year 15% of the people who purchased the stock will see a return the stock is worth 15% more at the end of the year than at the beginning the stock has lost 15% of its value since it was originally sold 3. a stock purchased on january 1 cost $4.35 per share. the same stock, sold on december 31 of the same year, brought in $4.75 per share. what was the approximate return on this stock? 0.09% 109% 1.09% 9% 4. a stock sells for $6.99 on december 31, providing the seller with a 6% annual return. what was the price of the stock at the beginning of the year? $6.59 $1.16 $7.42 $5.84