You are given the following returns for the Market and for XYZ in years 1998 (the best year for the market) and 2001 (the worst year).
(a) What is your estimate of the beta of stock XYZ?
(b) Assuming a risk free rate of 6 percent and an expected return on the Market of 12% in the coming year, what would be the required return on stock XYZ?
Market XYZ
1998 45.00% 67.50%
2001 -15.00% -22.50%