(a)What is the alpha and beta for Pepsi (PEP) and Bank of America (BAC)? Explain.

(b)Are either PEP or BAC mispriced? Explain.

(c)Assume the standard deviation of the market portfolio is 15%. Does PEP or BAC have a higher variance?

(d)?A higher fraction of PEP?s variance is due to unsystematic risk.? Is this statement true or false? Explain.

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SCL Regression for Pepsi (PEP) R Square Standard Error Observations Intercept S&P Regression Statistics Intercept S&P 0.254521062 0.039970315 R Square Standard Error Observations Coefficients SCL Regression for Bank of America (BAC) 61 0.00384728 0.504724665 Regression Statistics 0.410125324 0.133824915 61 Coefficients 0.004883104 2.411505069 Standard Error t Stat 0.005126715 0.750437693 0.112456445 4.488179107 t Stat 0.017164794 0.284483706 0.376516277 6.404783046 Standard Error P-value 0.45597358 3.38688E-05 P-value 0.777035839 2.72844E-08 Lower 95% -0.006411253 0.279699841 Upper 95% 0.014105814 0.72974949 Lower 95% Upper 95% 0.039229778 -0.029463569 1.658097745 3.164912393 SCL Regression for Pepsi (PEP) R Square Standard Error Observations Intercept S&P Regression Statistics Intercept S&P 0.254521062 0.039970315 R Square Standard Error Observations Coefficients SCL Regression for Bank of America (BAC) 61 0.00384728 0.504724665 Regression Statistics 0.410125324 0.133824915 61 Coefficients 0.004883104 2.411505069 Standard Error t Stat 0.005126715 0.750437693 0.112456445 4.488179107 t Stat 0.017164794 0.284483706 0.376516277 6.404783046 Standard Error P-value 0.45597358 3.38688E-05 P-value 0.777035839 2.72844E-08 Lower 95% -0.006411253 0.279699841 Upper 95% 0.014105814 0.72974949 Lower 95% Upper 95% 0.039229778 -0.029463569 1.658097745 3.164912393

Answer rating: 100% (QA)

a The alpha for PEP is 000385 and beta for PEP is 05047 The value of alpha means if SP is not consid... View the full answer