Anna is a Vice President at the J Corporation. The company is considering investing in a new factory and Anna must decide whether it is a feasible project. In order to assess the viability of the project, Anna must first calculate the rate of return that equity holders expect from the company stock. The annual returns for J Corp. and for a market index are given below. Currently, the risk-free rate of return is 1.8% and the market risk-premium is 4.1%

a) What is the beta of J Corp.'s stock?

b) Using the CAPM model, what isthe expected rate of return on J Corp. stock for the coming year?

Year. J Corp Return %. Market return %

1 -5.71 -3.40

2 12.80 8.94

3 18.04 12.43

4 22.54 15.43

5 -21.16 -13.70

6 23.11 15.81

7 24.53 16.76

8 18.98 13.06

9 8.99 6.40

10 14.30 9.94

11 -9.10 -5.66

12 -9.16 -5.70