HISTORICAL RATES OF RETURN

The data has been collected in the Microsoft Excel Online file below. Open the

spreadsheet and perform the required analysis to answer the questions below.

Open spreadsheet

a$.$ Use a spreadsheet $($or a calculator with a linear regression function$)$ to

determine Stock X$\text{'}$s beta coefficient. Do not round intermediate

calculations. Round your answer to two decimal places.

Beta $=$

b$.$ Determine the arithmetic 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.

NYSE

Average return, $\frac{?}{\text{b}\text{a}\text{r}}(r{)}_{\text{A}\text{v}\text{g}}$

Standard deviation, $$

Stock X

c$.$ Assume that the situation during Years $1$ to $7$ is expected to prevail in the

future $($i$.$e$.,$

hat$(r{)}_x\frac{?}{b}=ar(r{)}_{x,\text{A}\text{v}\text{e}\text{r}\text{a}\text{g}\text{e}},$

hat$(r{)}_M\frac{?}{b}=ar(r{)}_{M,\text{A}\text{v}\text{e}\text{r}\text{a}\text{g}\text{e}},$ and both ${}_x$ and $b_x$ 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.