A researcher estimates the following model relating the return on a firm’s stock as a function of its price-to-earnings ratio and its price-to-sales ratio: Return = β0 + β1P/E +

β2P/S +
. A portion of the regression results is shown in the accompanying table.

a. Specify the sample regression equation.

b. At the 10% significant level, are P/E and P/S jointly significant? Show the relevant steps of the appropriate hypothesis test.

c. Are both explanatory variables individually significant at the 10% significance level? Show the relevant steps of the appropriate hypothesis tests.

ANOVA SS MS Significance F JP Regression 918.746 459.3728 2.817095 0.077415 Residual 27 4402.786 163.0661 Total 29 5321.532 Standard Lower Upper t Stat p-value 95% -12.0243 7.886858 -1.5246 0.1390 - 28.21 0.3376 0.7383 Coefficients Eror 95% Intercept 4.16 0.1459 0.4322 P/E P/S -0.74 1.03 5.4417 2.2926 2.3736 0.0250 0.74 10.15