Question 6 [4 points] You run a regression of the excess returns of stock A on the excess returns of the market portfolio M and obtain the following output: RA - Rp = -.04 +1.0 % (RM Rp) + error The expected return of the market portfolio is 10% and the risk-free rate is 5%. a. What is the alpha of stock A? [1 point] Alpha = -0.04 b. What is the expected return of stock A? [1 point] E(Ra) = 0.05 + 1.0(0.10.05) = 0.1 = 10% c. Challenging: Suppose you are a fund manager and you want to build your portfolio such that it has an alpha of 2% and a beta of zero. What must be your portfolio's weights on stock A, the market, and risk-free asset? 2 points