8 Consider the following historical rate of return series:

Year	S&P 500	IBM
1991	0.2631	-0.2124
1992	0.0446	-0.4336
1993	0.0706	0.1208
1994	-0.0154	0.3012
1995	0.3411	0.2430
1996	0.2026	0.6584
1997	0.3101	0.3811
1998	0.2700	0.7624
1999	0.1953	0.1701
2000	-0.1014	-0.2120
2001	-0.1304	0.4231
2002	-0.2337	-0.3570
2003	0.2638	0.2049
2004	0.0899	0.0719
2005	0.0300	-0.1583
2006	0.1362	0.1977
2007	0.0353	0.1284

a. What was IBMs equity beta over this sample period?

b. If IBM had a debt/equity ratio of 70%, what was its asset beta? (Hint: To determine a D/A ratio, make up an example in which a firm has a 70% D/E ratio.)

c. How important is the 1992 observation to your beta estimate?

d. If HP is similar to IBM in its business but has a debt/equity ratio of 10%, what would you expect HPs levered equity beta to be? (Hint: Use the same leverage conversion trick.)