The Excel file Stock Data contains monthly data for the stock MSFT and the S&P 500 Index (i.e., the market).

a. Determine the equation of the Characteristic Line for MSFT using the appropriate EXCEL functions.

i. Explain the meaning of each computed value in the Characteristic Line equation relative to the expected returns for MSFT.

ii. Compute R2 for this equation using the appropriate EXCEL function. Explain the meaning of the R2 value for this equation.

b. Using EXCEL functions perform and report the results of the appropriate statistical significance test for each value contained in this equation.

c. Construct a graph of the Characteristic Line for MSFT using EXCELs graphing features and be sure to include on the graph:

i. Appropriate Title for Graph

ii. Appropriate Labels for the Axes

iii. R2 Value

iv. Characteristic Line Equation

v. Trendline

onth MSFT S&P 500

1 3.59% 4.00%

2 6.72% 2.40%

3 0.14% 3.30%

4 2.21% 0.30%

5 -2.16% 4.20%

6 10.50% -0.40%

7 -12.88% 4.40%

8 0.72% 1.90%

9 5.41% 3.40%

10 6.69% 1.00%

11 4.50% 1.00%

12 9.82% 1.50%

13 4.86% 2.60%

14 1.16% 0.40%

15 -1.87% -4.50%

16 3.92% 2.10%

17 7.65% 5.60%

18 4.08% 2.70%

19 14.30% 7.60%

20 5.34% -2.00%

21 23.45% 6.20%

22 -4.41% 0.80%

23 -5.96% -4.20%

24 32.52% 6.00%

25 2.06% 6.10%

26 1.92% 4.50%

27 11.87% 7.90%

28 -6.50% -5.60%

29 0.09% 5.50%

30 -1.75% -3.30%

31 8.85% 4.60%

32 -8.66% 1.70%

33 15.43% 1.10%

34 13.62% 7.20%

35 5.60% 5.10%

36 0.70% 1.00%

37 -5.89% -1.70%

38 27.78% 4.10%

39 1.44% -1.10%

40 -12.73% -14.50%

41 14.72% 6.40%

42 -3.80% 8.10%

43 15.23% 6.10%

44 13.68% 5.80%

45 26.18% 4.20%

46 -14.21% -3.10%

47 19.40% 4.00%

48 -9.27% 3.90%

49 -0.77% -2.40%

50 11.77% 5.60%

51 -4.85% -3.10%

52 7.87% -0.50%

53 -2.16% -2.70%

54 2.21% 6.30%

55 -1.64% 2.00%

56 28.23% 5.90%

57 -16.17% -5.00%

58 -8.68% -1.90%

59 18.88% 9.80%

60 -34.35% -3.00%

61 -10.30% -2.10%

62 27.87% 2.50%

63 -12.73% -1.60%

64 0.00% 6.20%

65 -13.61% -5.30%

66 14.20% -0.40%