1. Calculate Beta for Asset H (Just follow the steps). STEP 1: Get the average returns for both the asset and the market Year 2004 2007 Returns Asset Market 0.15 0.1 0.125 0.07 0.115 0.08 -0.02 0 -0.04 -0.01 2005 2008 2006 Totals Avge Returns STEP 2: Get the variance and standard deviation of the asset and the market. Returns Asset Market Return Deviations Asset H Market Deviations 2 Asset H Market Year 2004 2007 2005 2008 2006 0.1 0.07 0.15 0.125 0.115 -0.02 -0.04 0.08 0 -0.01 Var = SD= . STEP 3: Get the Covariance. Explain your results (i.e. what does covariance tell you) Covariance = Return Deviations Asset A* Return Deviations Market N-1 Dev H DevMkt Return Deviations Year Asset H Market 2004 2007 2005 2008 2006 Covariance = STEP 4: Get Correlation. Explain your results (i.e. what does correlation tell you) Covariance Correlation = 0 market STEP 5: Estimate Beta. Explain the meaning of Beta. What's the logic behind your estimation? Bi = Correlation market