Question
The index model has been estimated for stocks A and B with the following results: R A = 0.03 + 0.7 R M + e
The index model has been estimated for stocks A and B with the following results:
RA = 0.03 + 0.7RM + eA
RB = 0.01 + 0.9RM + eB
sM = 0.35; s(eA) = 0.20; s(eB) = 0.10
a. What is the standard deviation of stock A?
b. What is the covariance between the returns on stocks A and B?
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Practical financial management
Authors: William r. Lasher
5th Edition
0324422636, 978-0324422634
