Question
The index model has been estimated for stocks A and B with the following results: RA= 0.01 + 0.5RM+ eA RB= 0.02 + 1.3RM+ eB
The index model has been estimated for stocks A and B with the following results:
RA= 0.01 + 0.5RM+ eA
RB= 0.02 + 1.3RM+ eB
M= 0.25 (eA) = 0.20 (eB) = 0.10
The covariance between the returns on stocks A and B is
a. 0.0406
b. 0.4000
c. 0.0050
d. 0.0384
e. 0.1920
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Cornerstones of Financial and Managerial Accounting
Authors: Rich Jones, Mowen, Hansen, Heitger
1st Edition
9780538751292, 324787359, 538751290, 978-0324787351
