Covariance between the returns on stocks a and b

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The index model has been estimated for stocks A and B with the following results:

RA= -0.06 + 0.72RM+ eA

RB= 0.03 + 2.95RM+ eB

The standard deviation of the market index is 19%; the residual standard deviation of the error terms for stock A is 44%; the residual standard deviation of the error terms for stock B is 36%. What is the covariance between the returns on stocks A and B?

Reference no: EM132464962

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