Sanity-checking a claimed $R^2$

A vendor claims a daily signal on Nifty futures with out-of-sample $R^2 = 2\%$. (a) Using Proposition 13.7 for a pure timer, compute the implied daily and annualised Sharpe ratio (252 days). Repeat with the exact linear-timer result of Proposition 13.8. (b) Using M04 · 4.5 and 4.6, list the questions you would ask before believing it.