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You are given the following returns on the market and Stock F during the last three years. We could calculate beta using data for Years

You are given the following returns on "the market" and Stock F during the last three years. We could calculate beta using data for Years 1 and 2 and then, after Year 3, calculate a new beta for Years 2 and 3. How different are those two betas, i.e., what's the value of beta 2 beta 1? (Hint: You can find betas using the Rise-Over-Run method, or using your calculator's regression function.)

Year

Market

Stock F

1

6.10%

10.00%

2

12.90%

3.70%

3

16.20%

21.71%

Answers:

a.

8.30

b.

9.20

c.

9.71

d.

8.74

e.

7.89

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