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INSTRUCTIONS FOR ALL HOMEWORK ASSIGNMENTS: Please indicate how you obtained your answer. 1. Consider the CAPM model for Microsoft: (sample size = 64) Y: Microsoft risk adjusted return X: risk adjust return of the market Using this regression output to answer following questions: a. Do a hypothesis test on Bo = 0 b. Construct a 95% condence interval for B: I? Standard Coeicients Error Intercept 0.001146 0.007199 Market 1.042275 0.144518 a. Step1: H0130 = 0 Ha: 50 3': 0 . _ b0 _ 0.001145 __ Step 2. T Two) - 0.007199 0.159 Step3:df=6411=62 Step 4: P > a Step 5: Fail to reject H0, meaning that there is no strong evidence to reject 50 = 0. b. 31 i Zse = (0.7532.1.3313) 2. We want to study how parent's heights affect children's height. Consider the regression model of Y=student's height (h) on X1=mother's height (ft), X2=Gender Dummy variable. (fema1e=0, male =1): Y = Bo + 31X1 + BZXZ (a) If the mother's height is 5.5 feet, what is your best prediction for the student's height, if the student is a male? What is the approximated 95% condence interval for this prediction