A firm wishes to estimate graphically the betas for two assets, A and B. It has gathered the return data shown in the following table for the market portfolio and for both assets over the past 10 years, 2009–2018.

a. On a set of “market return (x-axis)–asset return (y-axis)” axes, use the data given to draw the characteristic line for asset A and for asset B.
b. Use the characteristic lines from part a to estimate the betas for assets A and B.
c. Use the betas found in part b to comment on the relative risks of assets A and B.

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Actual return Market portfolio Year Asset A Asset B 2009 6% 11% 16% 2010 2 11 -4 -10 2011 -13 2012 -4 3 3 2013 -8 -3 2014 16 19 30 2015 10 14 22 2016 15 18 29 2017 12 19 2018 13 17 26