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.) $\begin{array}{lr}
\text { Year } &\text { Market } & \text { Stock F } \
1&6.10 \%& 6.50 \% \
2&12.90 \% & -3.70 \% \
3&16.20 \% & 21.71 \%
\end{array}$
A) 7.89
B) 8.30
C) 8.74
D) 9.20
E) 9.66

Question

Quizplus · Accepted Answer

$\begin{array}{lr}
\text { Year } &\text { Market } & \text { Stock F } \
1&6.10 \%& 6.50 \% \
2&12.90 \% & -3.70 \% \
3&16.20 \% & 21.71 \%
\end{array}$ 
 Years 1 and 2 , beta $1 =$ RisedRu1 $= ( - 3.7 - 6.5 ) / ( 12.9 - 6.1 ) = - 1.50$
Years 2 and 3 , beta $2 =$ Rise $/$ Ru $= ( 21.71 - - 3.7 ) / ( 16.2 - 12.9 ) = 7.70$
Difference
Beta $2 - B$ eta $1 = 9.20$ 
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