2. You are interested in two investment, Fidelity Spartan Total Market Index Investment (FSTMX), and Fidelity Low Price Stock Fund (FLPKX). The followings are their 10 year returns from 2001 to 2010 that I have recorded from finance.yahoo.com : Year FLPSX FSTMX 2001 26.71% -10.79% 2002 -6.18% -20.99% 2003 40.85% 31.24% 2004 22.24% 12.11% 2005 8.65% 6.42% 2006 17.76% 15.73% 2007 3.16% 5.57% 2008 -36.17% -37.18% 2009 39.08% 28.39% 2010 19.95% 16.42% (a) What are the average returns of the two funds? (b) What are the return volatilities of the two funds? (c) Compute the covariance and correlation between returns of the two funds. (d) Plot the returns of FLPSX against the returns of FSTMX (using Excel). Do you see a relationship between the two? From Fin6301, why do you think there is or is not a relation? (e) Compute the regression line: RFLPkx=a +* RFSTMX , using the formulas in Lecture Note 1, and plot the line on the same graph in (d). What do you observe? (f) Using regression analysis in Excel, find the linear relationship between the returns of the two funds, i.e. regressing returns of FLPKX on returns of FSTMX