The expected rates of return and the beta coefficients of the alternatives supplied by an independent analyst are as follows:

1. What is a beta coefficient, and how are betas used in risk analysis?

2. Do the expected returns appear to be related to each alternatives market risk?

3. Is it possible to choose among the alternatives on the basis of the information developed thus far? Use the data given at the start of the problem to construct a graph that shows how the T-bills, High Techs, and the markets beta coefficients are calculated. Then discuss what betas measure and how they are used in risk analysis

Return, Risk (Beta) Security High Tech Market U.S. Rubber T-bills Collections 99% 8.0 7.3 3.0 1.2 1.31 1.00 0.88 0.00 (0.50)