You run a regression of monthly returns of Mapco, an oil and gas-producing firm, on the S&P 500 Index and come up with the following output for the period 19911995: RMapco=0.0006+0.46XRM and R2 = 5%. The Treasury bond rate is 5% and equity risk premium is 5.5%. 1. Compute Jensen's alpha and give an interpretation for the number you find. What does this value tell you about the managers' abilities at Mapco? (5 points) 2. What does R2 measure? What proportion of this firm's risk is diversifiable? (5 points) 3. What would an investor in Mapco's stock require as a rate of return according to the CAPM? Construct the 95% confidence interval for the required rate of return for Mapco if the historical standard deviation of Mapco's rate of return is 20% and rate of returns are normally distributed. (5 points) You run a regression of monthly returns of Mapco, an oil and gas-producing firm, on the S&P 500 Index and come up with the following output for the period 19911995: RMapco=0.0006+0.46XRM and R2 = 5%. The Treasury bond rate is 5% and equity risk premium is 5.5%. 1. Compute Jensen's alpha and give an interpretation for the number you find. What does this value tell you about the managers' abilities at Mapco? (5 points) 2. What does R2 measure? What proportion of this firm's risk is diversifiable? (5 points) 3. What would an investor in Mapco's stock require as a rate of return according to the CAPM? Construct the 95% confidence interval for the required rate of return for Mapco if the historical standard deviation of Mapco's rate of return is 20% and rate of returns are normally distributed. (5 points)