Consider the Regression Equation: R_i - R_f = G₀

question 17

Multiple Choice

Consider the regression equation: r_i - r_f = g₀ + g₁b_i + e_it
where:
R_i - r_f = the average difference between the monthly return on stock i and the monthly risk-free rate
B_i = the beta of stock i
This regression equation is used to estimate

• A)the benchmark error.
• B)the security market line.
• C)the capital market line.
• D)the benchmark error and the security market line.

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