Monthly Returns Tesla Returns Market Excess Re Bitcoin Returns 7.7% 3.8% 10.3% 5.8% 2.2% 0.5% 3.4% 2.4% 10.8% 1.5% 0.9% 1.3% 2.0% -1.5% 15.9% 2.8% 2.0% -2.9% 3.4% 3.3% 4.2% 7.9% 6.5% -2.0% 1.4% -1.8% 10.7% Since Tesla announced it would be putting bitcoin on the balance sheet people have speculated that the returns on tesla should move when bitcoin prices move To test this we are going to try and predict Tesla returns (Y) with Overall Stock Excess Market returns (X1) and Bitcoin returns (X2). Y = BO + B1 * X1 + B2 * X2 a) Using solver, estimate the parameters BO, B1 and B2 in the equation above by minimizing the sum of squared errors. Answer -1.0% -1.2% 4.5% BO 1.2% 1.6% 1.4% B1 5.9% 5.8% -3.1% B2 4.0% 4.2% 10.2% 13.6% 6.5% -0.1% b) Predict Tesla returns if next month the market excess return is 2% and the return on Bitcoin is 5% (using answer above) Answer -9.2% -5.9% 7.4% c) Using a different method calculate the exact value of the parameters, they should be close to your answers in (a) -3.0% 0.7% 7.1% Answer 2.8% 1.8% 2.0% BO 6.2% 2.1% 4.8% B1 5.9% 0.0% 12.1% B2 4.0% 1.5% 10.6% 11.4% 5.6% 10.7% 6.8% 1.3% 10.7% 2.0% 1.9% -1.6% 5.8% 2.3% 7.9%