Consider the regression equation:

$r_7-r_f=g_0{g}_1{b}_i{g}_2{s}^2(e_i)e_t$

where:

$r_{}-r_t=$ the average difference between the monthly return on stock i and the monthly risk$-$free rate

$b_i=$ the beta of stock I

$s^2(e_i)=$ a measure of the nonsystematic variance of the stock $i$

If you estimated this regression equation and the CAPM was valid, you would expect the estimated coefficient, $8_2,$ to be

None of the options are correct.

equal to the risk$-$free rate of return.

equal to the average difference between the monthly return on the market portfolio and the monthly risk$-$free rate.

$1.$

$0.$