Consider the Regression Equation: R_i − R_f = G₀

question 43

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.
• E) the benchmark error, the security market line, and the capital market line.

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