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Suppose that the index model for stocks A and B is estimated from excess returns with the following results: R A = 3% + 0.7

Suppose that the index model for stocks A and B is estimated from excess returns with the following results:

RA = 3% + 0.7RM + eA

RB = 2% + 1.2RM + eB

M = 20%; R-squareA = 0.20; R-squareB = 0.12

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.)

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