The following data show Morningstars Fair Value estimate and the Share Price for 28 companies. Fair Value

Question:

The following data show Morningstar€™s Fair Value estimate and the Share Price for 28 companies. Fair Value is an estimate of a company€™s value per share that takes into account estimates of the company€™s growth, profitability, riskiness, and other factors over the next five years (Morningstar 500, 2008 edition).

a. Develop the estimated regression equation that could be used to estimate the share price given the fair value.
b. At the .05 level of significance, is there a significant relationship between the two variables?
c. Use the estimated regression equation to predict the share price for a company that has a fair value of $50.
d. Do you believe the estimated regression equation would provide a good prediction of the share price? Use r2 to support youranswer.

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...