You Have the Following Data on (1) the Average Annual

You have the following data on (1) the average annual returns of the market for the past 5 years and (2) similar information on Stocks A and B. Which of the possible answers best describes the historical betas for A and B?
$\begin{array}{cc}\text { Years }&\text { Market }&\text { Stock A } & \text { Stock B } \\1&0.03&0.16 & 0.05 \\2&0.03&0.20& 0.05 \\3&0.03&0.18 & 0.05 \\4&0.03& 0.25& 0.05 \\5&0.03&0.14 &0.05\end{array}$

A) b_A > +1; b_B = 0.
B) b_A = 0; b_B = -1.
C) b_A< 0; b_B = 0.
D) b_A < -1; b_B = 1.
E) b_A > 0; b_B = 1.

Correct Answer:

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