Question 1 (15 points): Estimate following regression equation using Excel for the 5 stocks (one equation for each stock). Ri,t = i+ i RM,t + i,t (Ri,t = ri,t rf,t; RM,t = rM,t rf,t) Report for each stock and rank the s. Report standard deviation for each stock and the value weighted index and rank them. Are the two ranks identical? Draw SML (Security Market Line) and CML (Capital Market Line) with the five stocks spotted (the vertical intercept of SML and CML is the average of T-bill returns). Based on the estimated in the regression equation above, rank the five stocks and test if the of each stock is different from 0 at 95% significance level. Report the residual variance for each stock (idiosyncratic variance).

Question 2 (15 points): Estimate following regression equation using Excel for the 5 stocks (one equation for each stock). Ri,t = i+ iM RM,t + iSMB SMBt + iHML HMLt + i,t, (Ri,t = ri,t rf,t; RM,t = rM,t rf,t) Test if M, SMB, HML, and of each stock are different from 0 at 95% significance level and report the residual variance for each stock and compare it to the result from Question 1