QUESTIONS 1. Go to financeyahoo.com and download the ending monthly stock prices for FLIR Systems (FUR) for the last 60 months. Be sure to use the adjusted closing price to account for any stock splits and dividend payments. Next, download the ending value of the S\&P 500 index over the same period. For the historical risk-free rate, go to the Federal Reserve Bank of St. Louls website (www.stloulsfed.org) and find the naturity rate Downioad this file. What are the monthly returns, average monthly returns, and standard deviations for FUR Systems stock, the three-month Treasury bill, and the SSP 500 for this period? 2. Beta is often estimated by linear regression. A model often used is called the morket model, which is: In this regression, Rq is the teturn on the stock and Rn is the risk-free rate for the same period. RMn is the return on a stock market index such as the SSP 500 index, aj is the regression intercept, and j is the slope (and the stock's estimated beta). t represents the residuals for the regression. What do you think is the motivation for this particular regression? The intercept, ap is often called Jensen's alpha. What does it measure? if an asset has a positive Jensen's alpho, where would it plot with respect to the SML? What is the financiat interpretation of the residuals in the regression? 1. Use the market model to estimate the beta for FLIR Systems using the last 60 months of refurns (the fegression procedure in Excel is one easy way to do this). Plot the monthly returns on FuR Systems against the index and also show the fitted line. 2. Compare your beta for FUR Systems to the beta you find on finance.yahoo.com. How similar are they? Why might they be different