Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.6% + 1.20RM + eA RB = -1.6 % + 1.50RM + eB OM = 16%; R-squareд = 0.25; R-squareg = 0.15 What is the covariance between each stock and the market index? Note: Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is provided as 20%. Do not round your intermediate calculations. 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 = 3.6% + 1.20RM + eA RB = -1.6 % + 1.50RM + eB OM = 16%; R-squareд = 0.25; R-squareg = 0.15 What is the covariance between each stock and the market index? Note: Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is provided as 20%. Do not round your intermediate calculations. 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= 3.6 % + 1.20RM + eA
RB = -1.6 % + 1.50RM + eB
OM = 16%; R-squareд = 0.25; R-squareg = 0.15
What is the covariance between each stock and the market index?
Note: Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is
provided as 20%. Do not round your intermediate calculations. Round your answers to nearest whole number.
Stock A
Stock B
Covariance
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