You have run a regression of returns o
1. You have run a regression of returns of Devonex, a machine tool manufacturer, against
the S&P 500 Index using monthly returns over the last 5 years and arrived at the following
ReturnDevonex= – 0.20% + 1.50 ReturnS&P 500
If the stock had a Jensen’s alpha of +0.10% (on a monthly basis) over this period, estimate
the monthly riskfree rate during the last 5 years.