Problem: Suppose that the index model for stocks A and B is estimated from excess returns with the following results. Ra = 0.04 + 1.4RM + eA Re =-0.01 + 0.6RM + eB ON= 15, Var(ea)=81, Var(es)=225 A: What is the standard deviation of each stock? B: What are the covariance and the correlation coefficient between the two stocks? C: What is the covariance between each stock and the market index? Problem: Suppose that the index model for stocks A and B is estimated from excess returns with the following results. Ra = 0.04 + 1.4RM + eA Re =-0.01 + 0.6RM + eB ON= 15, Var(ea)=81, Var(es)=225 A: What is the standard deviation of each stock? B: What are the covariance and the correlation coefficient between the two stocks? C: What is the covariance between each stock and the market index