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The index model has been estimated for stocks A and B with the following results: R A = 0.01 + 0.5R M + e A

The index model has been estimated for stocks A and B with the following results: R A = 0.01 + 0.5R M + e A R B = 0.02 + 1.3R M + e B M = 0.25 (e A ) = 0.20 (e B ) = 0.10 Estimate (as necessary) and comment on the risk profile of each of these stocks and the relationship between the returns on stocks A and B.

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