Consider the CAPM model for Microsoft securities specifind as (nrus Ro")-A+A(Rsa, _ Rn.) + u; as weisthe following inform ion from the rocene 135 moedhs 6767.335 x XY x 2737818 135 Whene: (Rmafe-Re) and (Rsu isk premium respectively Re) are Microsoft risk premium and markot Rmsfe and Rar are respectively Microsoft and S&r meethly returns Ryaes the return on the treasury bill a. Estimate the model specified above and write down the estimaled equation in the useal form and then, 1t) Provide an economic interpretation Sor the estimated equation h. Provide an interpretation for each of your negression cocfficient estimates Calculate the standard error of each coeficient estimate c. d. Calculate the coefficient of determination, R-Squared Provide a 98% interval estimate for your slope and intercept coefficients e. f. With a 2% significance level, how do you determine whether movements in the market risk premium have a significant impact on Microsoft risk premium? (state clearly what are the relevant null and altemative hypothesis, and also, explain what are the implications of your test conclusion) z Based on your results, what is the estimated return for Microsoft on a given month, ifthe S&P retum is 5.7%, and the return on a 3-moths T-bill is . 125%" According to the Capital Asset pricing Model, assets having risk premia that fluctuate less than one-for-one with the market are called defensive assets, and those whose risk premia fluctuate more than one-for-one with the market are called aggressive assets h. Considering your estimates from question a), state whether Microsoft can best be described as aggr ve neutral, or defensive security. Test your statement at a 2% significance level i. If a security is riskier than the market, that security should generally also carn a higher risk premium than the market, and vice-versa. Using the average risk premia, is this the case here for Microsoft? Explain j. From your calculations above, what proportion of the variability of Microsofi premium can be attributable to systematic risk? To specific riskIC COLLAGE Consider the CAPM model for Microsoft securities specifind as (nrus Ro")-A+A(Rsa, _ Rn.) + u; as weisthe following inform ion from the rocene 135 moedhs 6767.335 x XY x 2737818 135 Whene: (Rmafe-Re) and (Rsu isk premium respectively Re) are Microsoft risk premium and markot Rmsfe and Rar are respectively Microsoft and S&r meethly returns Ryaes the return on the treasury bill a. Estimate the model specified above and write down the estimaled equation in the useal form and then, 1t) Provide an economic interpretation Sor the estimated equation h. Provide an interpretation for each of your negression cocfficient estimates Calculate the standard error of each coeficient estimate c. d. Calculate the coefficient of determination, R-Squared Provide a 98% interval estimate for your slope and intercept coefficients e. f. With a 2% significance level, how do you determine whether movements in the market risk premium have a significant impact on Microsoft risk premium? (state clearly what are the relevant null and altemative hypothesis, and also, explain what are the implications of your test conclusion) z Based on your results, what is the estimated return for Microsoft on a given month, ifthe S&P retum is 5.7%, and the return on a 3-moths T-bill is . 125%" According to the Capital Asset pricing Model, assets having risk premia that fluctuate less than one-for-one with the market are called defensive assets, and those whose risk premia fluctuate more than one-for-one with the market are called aggressive assets h. Considering your estimates from question a), state whether Microsoft can best be described as aggr ve neutral, or defensive security. Test your statement at a 2% significance level i. If a security is riskier than the market, that security should generally also carn a higher risk premium than the market, and vice-versa. Using the average risk premia, is this the case here for Microsoft? Explain j. From your calculations above, what proportion of the variability of Microsofi premium can be attributable to systematic risk? To specific riskIC COLLAGE