Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA= 3.0%+ 1.1RM + @A RB = -1.2 % + 1.2RM + eg OM= 29%; R-squareA= 0.29; R-squareg = 0.14 What is the covariance between each stock and the market index? (Calculate using numbers in decimal form, not percentages. Do not round your intermediate calculations. Round your answers to 3 decimal places.) Stock A Stock B Covariance 0.031 0.038

Q: where  is the excel sheet ,so i can see how you get  the answer.  I want to see the workings  please

A: Excel Workings are provided in the solution in the form of Excel snip. One can use the formula…

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A:

Q: can you solve this manually with formulas? thank you!

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Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.