Need to answer #3 only. I have provided answers to #1 and 2.

Question : You have collected returns on AnaDone Corporation (AD Corp.), a large diversified manufacturing firm, and the NYSE index for five years:

Year AD NYSE

1981 10% 5%

1982 5% 15%

1983 -5% 8%

1984 20% 12%

1985 -5% -5%

Question 1. Estimate the slope (beta) of the regression. (You can copy the data to Excel and use the Data Analysis tool to calculate it)

Student Answer:

-0.375

0

0.575

0.735 - correct answer

1

Question2. Question : You have collected returns on AnaDone Corporation (AD Corp.), a large diversified manufacturing firm, and the NYSE index for five years:

Estimate the intercept (alpha) of the regression.

Student Answer:

-0.00147 - correct answer

0.00345

0.0245

0.00455

Question3. Question : If the composite index (NYSE) is expected to grow by 2% next year, how much would you expect to make as a return over the next year?

Student Answer:

-0.147

0.735%

1.32%

1.47%

0.5%