Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.0% +1.05RM + CA RB =-1.2% +1.20RM + CB OM = 29%; R-squareA = 0.29; R-squareB = 0.14 What is the covariance between each stock and the market index? Note: Do not round intermediate calculations. Calculate using numbers NOT in decimal form. For example use "20" for calculation if standard deviation is provided as 20%. Round your answers to nearest whole number. Stock A Stock B Covariance
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.0% +1.05RM + CA RB =-1.2% +1.20RM + CB OM = 29%; R-squareA = 0.29; R-squareB = 0.14 What is the covariance between each stock and the market index? Note: Do not round intermediate calculations. Calculate using numbers NOT in decimal form. For example use "20" for calculation if standard deviation is provided as 20%. Round your answers to nearest whole number. Stock A Stock B Covariance
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Suppose that the index model for stocks A and B is estimated from excess returns with the following results:
RA
=
3.0% +1.05RM + еA
RB
=-1.2% +1.20RM + еB
ƠM = 29%; R-square A = 0.29; R-squareB = 0.14
What is the covariance between each stock and the market index?
Note: Do not round intermediate calculations. Calculate using numbers NOT in decimal form. For example use "20" for calculation
if standard deviation is provided as 20%. Round your answers to nearest whole number.
Covariance
Stock A
Stock B
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