You are given the following returns on "the market" and Stock F during the last three years.We could calculate beta using data for Years 1 and 2 and then,after Year 3,calculate a new beta for Years 2 and 3.How different are those two betas,i.e.,what's the value of beta 2 - beta 1? (Hint: You can find betas using the Rise-Over-Run method,or using your calculator's regression function.)
$\begin{array}{ccc}
\text { Year } &\text { Market }& {\text { Stock F }} \
1 & 6.10 \% & 6.50 \% \
2 & 12.90 \% & -3.70 \% \
3 & 1620 \% & 2171 \%
\end{array}$
A) 7.89
B) 8.30
C) 8.74
D) 9.20
E) 9.66

Question

You are given the following returns on "the market" and Stock F during the last three years.We could calculate beta using data for Years 1 and 2 and then,after Year 3,calculate a new beta for Years 2 and 3.How different are those two betas,i.e.,what's the value of beta 2 - beta 1? (Hint: You can find betas using the Rise-Over-Run method,or using your calculator's regression function.) 
$\begin{array}{ccc}
\text { Year } &\text { Market }& {\text { Stock F }} \
1 & 6.10 \% & 6.50 \% \
2 & 12.90 \% & -3.70 \% \
3 & 1620 \% & 2171 \%
\end{array}$
A) 7.89
B) 8.30
C) 8.74
D) 9.20
E) 9.66

Quizplus · Accepted Answer

$\begin{array}{ccc}
\text { Year } &\text { Market }& {\text { Stock F }} \
1 & 6.10 \% & 6.50 \% \
2 & 12.90 \% & -3.70 \% \
3 & 1620 \% & 2171 \%
\end{array}$ 
 Years 1 and 2, beta $1 =$ Rise/Run $ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $ $= ( - 3.7 - 6.5 ) / ( 12.9 - 6.1 ) = - 1.5 0$
Years 2 and 3, beta $2 =$ Rise/Run $ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $ $= ( 21.71 - - 3.7 ) ( 16.2 - 12.9 ) = 7.70$
Difference:  $ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $ $ \quad $ Bete 2 - Bete 1 $= 9.20$ You would get the same result using a calculator to find the two betas.

You Are Given the Following Returns on "The Market" and Stock