1)Plot the CAPM regressions of Portfolio A and Portfolio B (separate graphs) in the Excel spreadsheet. The market portfolio is represented by the S&P 500 and the risk-free rate is represented by 90-day T-Bill. Calculate the beta for each portfolio using the following methods:

i.The slope function in Excel

ii.The beta formula (co-variance divided by the market variance) is explained in the Modules 6 & 7 Notes; ppt lecture notes; and textbook. Recall the covariance between two assets (A & B) is the volatility of asset A times the volatility of asset B times the correlation between A & B.

Then calculate the alpha for each portfolio A & B using the intercept function in Excel and the CAPM formula solving for alpha. Note the two CAPM regressions are based on monthly returns so the y-intercept (or alpha) is a MONTHLY alpha