P5.9 Imagine you wish to estimate the betas for two investments, A and B. You have gathered

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P5.9 Imagine you wish to estimate the betas for two investments, A and B. You have gathered the following return data for the market and for each of the investments over the past 10 years, 2002–2011.

a. On a set of market return (x-axis)–investment return (y-axis) axes, use the data to draw the characteristic lines for investments A and B on the same set of axes.

b. Use the characteristic lines from part a to estimate the betas for investments A and B.

c. Use the betas found in part b to comment on the relative risks of investments A and B.

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