You have observed the following returns over time:
Year Stock X Stock Y Market
2009 14% 13% 12%
2010 19 7 10
2011 -16 -5 -12
2012 3 1 1
2013 20 11 15
Assume that the risk free rate is 6% and the market premium is 5%
A. What are the betas of stocks X and Y?
B. What are the required rates of return on stocks X and Y?
C. What is the required rate of return on a portfolio consisting of 8% of Stock X and 20% of stock Y?
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