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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 = 1.0% + 0.5

Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 1.0% + 0.5RM + eA RB = -1.0% + 1.0RM + eB M = 16%; R-squareA = 0.28; R-squareB = 0.21 What is the covariance between each stock and the market index?

Stock A:

Stock B:

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