BMO Nesbitt Burns Estimates the Index Model for a Stock

question 2

Multiple Choice

BMO Nesbitt Burns estimates the index model for a stock using regression analysis involving total returns.They estimated the intercept in the regression equation at 6% and the β at 0.5.The risk-free rate of return is 12%.The true α of the stock is ________.

• A) 0%
• B) 3%
• C) 6%
• D) 9%
• E) none of these

---

Definitions:

Curve Fitting

A statistical technique used to find the best way to plot a curve through a set of data points, often for predictive purposes.

Dependent Variables

Variables in an experiment or study whose changes depend on the effects of other variables, typically independent variables.

Data Points

Data points are individual pieces of factual information collected during research or analysis, used to represent quantitative or qualitative attributes of a variable.

Market Data

Information related to market trends, consumer behavior, and competitive analysis used to inform business decisions.