You are given the following set of data:

HISTORICAL RATES OF RETURN

Year NYSE Stock X

$1-26\mathrm{.}5\%-10\mathrm{.}0\%$

$237\mathrm{.}222\mathrm{.}0$

$323\mathrm{.}816\mathrm{.}5$

$4-7\mathrm{.}23\mathrm{.}0$

$56\mathrm{.}67\mathrm{.}6$

$620\mathrm{.}517\mathrm{.}2$

$730\mathrm{.}615\mathrm{.}1$

The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

a$.$ Use a spreadsheet $($or a calculator with a linear regression function$)$ to determine Stock X$\text{'}$s beta coefficient. Do not round intermediate calculations. Round your answer to two decimal places.

Beta $=$

b$.$ Determine the arithmetic average rates of return for Stock X and the NYSE over the period given. Calculate the standard deviations of returns for both Stock X and the NYSE. Do not round intermediate calculations. Round your answers to two decimal places.

NYSE Stock X

Average return, $\%\%$

Standard deviation, $\backslash$sigma $\%\%$

c$.$ Assume that the situation during Years $1$ to $7$ is expected to prevail in the future $($i$.$e$.,,,$ and both $\backslash$sigma x and bx in the future will equal their past values$).$ Also assume that Stock X is in equilibrium $-$ that is$,$ it plots on the Security Market Line. What is the risk$-$free rate? Do not round intermediate calculations. Round your answer to two decimal places.

$\%$

d$.$ Plot the Security Market Line.

Select the correct graph.

The correct graph is

graph Agraph Bgraph Cgraph D

A$.$

r$(\%)$

Beta

Security Market Line

B$.$

r$(\%)$

Beta

Security Market Line

C$.$

r$(\%)$

Beta

Security Market Line

D$.$

r$(\%)$

Beta

Security Market Line

e$.$ Suppose you hold a large, well$-$diversified portfolio and are considering adding to that portfolio either Stock X or another stock, Stock Y$,$ which has the same beta as Stock X but a higher standard deviation of returns. Stocks X and Y have the same expected returns: $==10\mathrm{.}6\%.$ Which stock should you choose?