Consider the CAPM model for Ford securities specified as:

a. Estimate the model specified above and write down the estimated equation in the usual form

b. Provide an interpretation for each of your regression coefficient estimates. (2pts)

c. Calculate the standard error of each coefficient estimate. (3pts)

d. Calculate the coefficient of determination R-Squared, and provide an interpretation for it. (1pt)

e. Provide a 95% interval estimate for your slope and intercept coefficients. (2pts)

f. With a 5% significance level, how do you determine whether movements in the market risk premium have a significant impact on Ford risk premium? (state clearly what are the relevant null and alternative hypothesis, and also, explain what are the implications of your test conclusion). According to the Capital Asset pricing Model, assets having risk premia that fluctuate less than one-forone with the market are called defensive assets, and those whose risk premia fluctuate more than onefor-one with the market are called aggressive assets.

g. Considering your estimates from question a), state whether Ford can best be described as aggressive, neutral, or defensive security. Test your statement at a 5% significance level. (

h. From your calculations above, what proportion of the variability of Ford premium can be attributable to systematic risk? to specific risk?

(RFord -Rtbill) = Bo + B. (Rs&P - Rtbull) +u; as well as the following information from the recent 135 months: 1 Y = (RFord -Rtbill) Y = 157.899 X = (Rs&p - Rebu) X = 30.04734 x 2 = 2737.818 y2 = 39819. 39 XY = 5701.46 I n = 135 Where: - (RFord -Rtbill) and (Rs&P -Rtbull), are GE risk premium and market risk premium respectively; - RFord and Rs&P, are respectively Ford and S&P monthly returns; - Rebull the return on the treasury bill. (RFord -Rtbill) = Bo + B. (Rs&P - Rtbull) +u; as well as the following information from the recent 135 months: 1 Y = (RFord -Rtbill) Y = 157.899 X = (Rs&p - Rebu) X = 30.04734 x 2 = 2737.818 y2 = 39819. 39 XY = 5701.46 I n = 135 Where: - (RFord -Rtbill) and (Rs&P -Rtbull), are GE risk premium and market risk premium respectively; - RFord and Rs&P, are respectively Ford and S&P monthly returns; - Rebull the return on the treasury bill