Investment portfolio question.........?

Does anyone know the answer to this question:

An analyst regressed portfolio returns against the market and arrived at the following regression equation:
y = 0.75 + 1.36x

If the analyst expects the market to return 15% next year, what is the expected portfolio return?

y is the portfolio return, x is the market return. So just plugging 15% into the equation and solving for x gives you an expected return of 21.15%.

The 1.36 is the portfolio beta, or sensitivity to market movements. The 0.75 is alpha, or excess return.

What is y supposed repressent and what is x supposed to represent

very tricky here. Need more info on this formular. You could have two different answer

1.) If Y = 0.75 + 136 * X, X = 15%, this will give 21.15(%), 1.36 should be 136.

2.) Why risk free rate is 0.75?

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