You regress the annual excess return of a stock on the excess returns of the market portfolio. During the sample period, the excess return of the market portfolio had an average of 6% and a standard deviation of 17%. The T-Bill rate is 2%.

coefficients t-stat

Intercept 0.0201 3.41

r_M - r_f 0.7419 6.12

• Does the stock have a statistically significant CAPM alpha?
• What is the 95% confidence interval for the CAPM beta of ABC?
• If we invest $2,000 in the stock, $5,000 in the market portfolio and $3,000 in Treasury Bills, what is the CAPM alpha of that portfolio? What is the market beta of that portfolio?