Problem 7

You estimated a regression model using annual returns of ExxonMobil (as a dependent variable) and of the market (as an independent variable). The R-squared of this regression is 0.9. We can conclude that:

A) ExxonMobils systematic risk is higher than ExxonMobils unsystematic risk

B) ExxonMobils unsystematic risk is higher than ExxonMobils systematic risk

C) ExxonMobils systematic risk and ExxonMobils unsystematic risk are about the same

D) This R-squared implies that ExxonMobils beta is larger than one

E) This R-squared implies that ExxonMobils beta is smaller than one