Problem 3-5 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%		- 12.0%
2		37.2		22.0
3		23.8		19.0
4		- 7.2		2.0
5		6.6		11.4
6		20.5		17.7
7		30.6		15.2

Use a spreadsheet (or a calculator with a linear regression function) to determine Stock X's beta coefficient. Round your answer to two decimal places. Beta = .51

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. Round your answers to two decimal places.

		Stock X		NYSE
Average return,		_____ %		_____%
Standard deviation,		_____%		_____ %