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Characteristic Line and Security Market Line You are given the following set of data: HISTORICAL RATES OF...

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Finance

Characteristic Line and Security Market Line

You are given the following set of data:

HISTORICAL RATES OF RETURN
Year     NYSE        StockX
1- 26.5%- 17.0%
237.2   16.0   
323.8   14.0   
4- 7.2   5.0   
56.6   9.9   
620.5   19.4   
730.6   17.9   
  1. Use a spreadsheet (or a calculator with a linear regressionfunction) to determine Stock X's beta coefficient. Round youranswer to two decimal places.
    Beta =
  2. Determine the arithmetic average rates of return for Stock Xand the NYSE over the period given. Calculate the standarddeviations of returns for both Stock X and the NYSE. Round youranswers to two decimal places.
      StockX          NYSE        
    Average return,%%
    Standard deviation, σ%%

  3. Assume that the situation during Years 1 to 7 is expected toprevail in the future and both σx and bx inthe future will equal their past values). Also, assume that Stock Xis in equilibrium - that is, it plots on the Security Market Line.What is the risk-free rate? Round your answer totwo decimal places.
    %

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