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Imagine you wish to estimate the betas for two investments, A and B. You have gathered the following return data for the market and for

Imagine you wish to estimate the betas for two investments, A and B. You have gathered the following return data for the market and for each of the investments over the past 10 years, 20082017.

a. On a set of market return (x-axis)investment return (y-axis) axes, use the data to draw the characteristic lines for investments A and B on the same set of axes.

b. Use the characteristic lines from part a to estimate the betas for investments A and B. a. The equation of the line for asset A is yA=nothingxMarket+nothing. (Round to two decimal places.)

Historical Returns

Investment

Year

Market

A

B

2008

5.7%

11.8%

15.4%

2009

2.9%

7.1%

9.7%

2010

13.4%

3.4%

9.8%

2011

3.6%

2.7%

3.5%

2012

8.8%

0.4%

3.3%

2013

16.3%

18.6%

29.3%

2014

10.7%

13.1%

21.5%

2015

14.3%

17.7%

29.7%

2016

7.7%

12.8%

18.4%

2017

12.4%

16.5%

26.4%

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