The rate of return on stock ‘a’ is described in terms of a regression on the rate of return on the rate of return on index 1 as follows: Ra = 1.7% + 0.65*I1 + e1. It can also be described in terms of a regression the rate of return on index 2 as follows: Ra = -1.4% + 1.2*I2 + e2. You also know that the risk-free rate is 2% and the expected rate of return on index 1 and 2 are 10% and 8% respectively. If one of these indexes is in fact the market portfolio, can you tell which one?



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