Q3.You have historical data on the monthly returns of a stock, Stock Z, and the market index over the past five years:

Stock Z Returns:

Year 1: 12%, 10%, 14%, 11%, 15%, 12%, 14%, 10%, 11%, 13%, 12%, 16%

Year 2: 11%, 13%, 12%, 10%, 14%, 15%, 11%, 12%, 13%, 14%, 10%, 11%

Year 3: 14%, 12%, 16%, 15%, 17%, 14%, 15%, 12%, 13%, 16%, 12%, 13%

Year 4: 15%, 16%, 14%, 11%, 17%, 18%, 15%, 14%, 16%, 17%, 11%, 12%

Year 5: 16%, 15%, 17%, 13%, 18%, 20%, 16%, 15%, 17%, 18%, 13%, 14%

Market Index Returns (NASDAQ):

Year 1: 10%, 9%, 11%, 10%, 12%, 11%, 12%, 9%, 10%, 11%, 10%, 13%

Year 2: 9%, 10%, 11%, 9%, 12%, 13%, 10%, 11%, 10%, 12%, 9%, 10%

Year 3: 11%, 9%, 13%, 12%, 14%, 11%, 13%, 10%, 11%, 13%, 10%, 11%

Year 4: 12%, 13%, 11%, 10%, 14%, 15%, 13%, 12%, 14%, 15%, 10%, 11%

Year 5: 13%, 12%, 14%, 11%, 15%, 16%, 14%, 13%, 15%, 16%, 11%, 12%

show step by step detail working

a) Calculate the beta of Stock Z.

b) Interpret the beta value in terms of systematic risk.