Working off Table 9.2:

(a) The covariance between H and N is 78.75%%.

(b) The covariance between I and N is 81%%.

(c) The variance of N is 79.31%%. Actually, this number was in the table itself.

(d) The beta is the covariance divided by the variance: βH,N

= 78.75%%/79.31%% ≈ 0.993.

(e) This is βI,N

= 81%%/79.31%% ≈ 1.021.

Repeating the exercise for portfolio T instead of N: The covariance of T and H is 58.5%%, between T and I is 145.8%%, and between T and itself is 119.6%% (the variance). Thus, the beta of H with respect to T is

βH,T

= 58.5%%/119.6%% ≈ 0.49. The beta of I with respect to T is βI,T

= 145.8%%/119.6%% ≈ 1.22.

This confirms the market betas I claimed in the text.