Consider a one-factor model for a stock's annual returns:

rt = Alpha + Beta r m,t + Epsilon t

where r m,t is the return on market on year t, and the rest of variables are self-explanatory. You use a large sample to estimate the parameters and find an Alpha of 0.05 and a Betaof 1.2. T-stats are 2.00 and 12.00, respectively.

a. Write the null and alternative consistent with testing whether the of the stock is statistically different from 1.

b. What is the expected return on the stock next year if market return is expected to be 0.08?