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1. Using Excel, solve problem number 12 from Chapter 02’s “Practice Problems”,and estimate the equation: Sales = β0 + β1 ln(Advertising) + u. Submit anExcel file showing your solution to the questions of this problem using theformulas covered in chapter 02, only. Do not use formulas from Excel tocalculate the betas and the R-squared.
2. Based on the file capm.csv, estimate the CAPM equation foreach of the stocks included in that file, namely: FORD, GE, MICROSOFT,and ORACLE. In particular, you need to estimate the following equationfor each stock based on the CAPM specification:Ra − Rf = β0 + β1(Rm − Rf )
• In this case, Ra − Rf is the dependent variable, where Ra is the returnof the stock, and Rf is the return of the risk-free asset, corresponding tothe 3 months treasury bills rate (’USTB3M’ column in the file).
• Rm − Rf is the explanatory or independent variable, where Rm is thereturn of the market, which can be obtained from the S&P index foundin the column ’SANDP’ (Note: the SANDP column is the index value,not the return).• Note: the variable ’USTB3M’ is already in percentage points (that is, ithas been multiplied by 100 already). Therefore, for consistency purposes,it is recommended that you also multiple Ra and Rm when calculatingthe returns of the asset and the market, respectively.