Consider the regression equation: r_i - r_f = g₀ + g₁b₁ + g₂s²(e_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 s²(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, g₀, has to be

0.

1.

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.

None of the options