Characteristic Line and Security Market Line You are given the following set of data: Historical Rates of Return Year NYSE Stock X 1 -26.5% -15.0% 2 37.2 2.0 3 23.8 19.5 4 -7.2 4.0 5 6.6 11.5 6 20.5 30.6 19.2 15.5 a. Use a spreadsheet (or a calculator with a linear regression function) to determine Stock X's beta coefficient. Do not round intermediate calculations. Round your answer to two decimal places. b. Determine the Brithmetic average rates of return for Stock X and the NYSE over the period given. Calculate the standard deviations of returns for both Stock X and the NYSE. Do not round intermediate calculations. Round your answers to two decimal places. Average return, Avg Standard deviation, o Stock X % % NYSE % 96 c. Assume that the situation during Years 1 to 7 is expected to prevail in the future (ie., Fx FX,Average FM FM,Average, and both a, and by in the future will equal their past values). Also assume that Stock X is in equilibrium that is, it plots on the Security Market Line. What is the risk-free rate? Do not round intermediate calculations. Round your answer to two decimal places. 96 d. Plot the Security Market Line. Choose the correct graph. The correct graph is -Select- (%) 45- 40- 35 30- 25 20+ 15+ 10+ A 40 35- 30 25- 22 20 15 10+ B 5+ 0.55 0.5 1 1.5 2 2.5 3 3.5 4 Beta (%) 45 40- 35- 30 25- 20 15+ C 5 -0.5 0.5 1 1.5 2 2.5 3 3.5 4 r(%) 40- 35 30 25 20 15 D 10 5 -0.5 0.5 1 1.5 2 2.5 3 3.5 4 Beta 10+ 5 -0.5 0.5 1 1.5 2 2.5 3 3.5 4 Beta e. Suppose you hold a large, well-diversified portfolio and are considering adding to that portfolio either Stock X or another stock, Stock Y, which has the same beta as Stock X but a higher standard deviation of returns. Stocks X and Y have the same expected returns: FxPy -10.6%. Which stock should you choose? In theory, you should -Select- as far as -Select-