Can you estimate the annualized risk-free rate

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You have run a regression of monthly returns on Am- gen, a large biotechnology rm, against monthly returns on the S&P 500 Index, and come up with the following output:

Rstock = 3.28% + 1.65 RMarketR2 = 0.20

The current one-year Treasury bill rate is 4.8% and the current thirty-year bond rate is 6.4%. The rm has 265 million shares outstanding, selling for $30 per share.

a) An analyst has estimated correctly that the stock did 51.10% better than expected annually during the pe- riod of the regression. Can you estimate the annualized risk-free rate that she used for her estimate?

Reference no: EM131962537

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