1 You have the following data on (1) the average annual returns of the market for the past 5 years and (2) similar information on Stocks A and B Which of the possible answers best describes the historical betas for A and B Years Market Stock A Stock B 1 0 03 0 16 0 05 2 0 05 0 20 0 05 3 0 01 0 18 0 05 4 0 10 0 25 0 05 5 0 06 0 14 0 05 What do we know about the beta of each stock Stock A Stock B Which stock has a higher beta

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Question: 1. You have the following data on (1) the average annual returns of the market for the past 5 years and (2) similar information on

1. You have the following data on (1) the average annual returns of the market for the past 5 years and (2) similar information on Stocks A and B. Which of the possible answers best describes the historical betas for A and B?

Years	Market	Stock A	Stock B
1	0.03	0.16	0.05
2	-0.05	0.20	0.05
3	0.01	0.18	0.05
4	-0.10	0.25	0.05
5	0.06	0.14	0.05

What do we know about the beta of each stock?

Stock A?

Stock B?

Which stock has a higher beta?

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