A financial analyst seeks to determine the relationship between the return on PepsiCos common stock and the

Question:

A financial analyst seeks to determine the relationship between the return on PepsiCo’s and the return on the stock market as a whole. She has collected data on the monthly returns of PepsiCo’s stock and the monthly returns of the Standard & Poor’s stock index for the last five years. Using these data, she has estimated the following regression equation
RPep = .06 + .92RS&P.
Here, returns are expressed in percentage terms. The t-values for the coefficients are 2.78 and 3.4, respectively, and the equation’s R2 is .28.
a. Do the respective coefficients differ significantly from zero?
b. The value of R2 seems quite low. Does this mean the equation is invalid? Given the setting, why might one expect a low R2?
c. Suppose the S&P index is expected to fall by 1 percent over the next month. What is the on PepsiCo’s stock?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...