We estimate CAPM models of stocks A and B with the following results: RA= 2.8%+ 1.0 RM+EA Rg=-1% +1.3 RM + es where o A = 34.64%; 0B = 64.9%; 0M = 18%; R = 0.27; R = 0.13. Assume you create a portfolio P with equal investment in both A and B. (Round intermediate calculations to 4 decimal places. Calculate using numbers in decimals, not in percentages. Round your final answers to 4 decimal places.) (Total 17 points) a) Calculate the correlation coefficient between the two stocks. (3 points) b) Calculate the covariance between each stock and the market index. (3 points) c) What is the portfolio-specific variance of your portfolio P? (4 points) Now assume you create a portfolio Q. with 50% in portfolio P and 50% in T-bill. d) What is the portfolio-specific variance of your portfolio Q? (4 points) e) What is the covariance between the portfolio Q and the market index? (3 points) We estimate CAPM models of stocks A and B with the following results: RA= 2.8%+ 1.0 RM+EA Rg=-1% +1.3 RM + es where o A = 34.64%; 0B = 64.9%; 0M = 18%; R = 0.27; R = 0.13. Assume you create a portfolio P with equal investment in both A and B. (Round intermediate calculations to 4 decimal places. Calculate using numbers in decimals, not in percentages. Round your final answers to 4 decimal places.) (Total 17 points) a) Calculate the correlation coefficient between the two stocks. (3 points) b) Calculate the covariance between each stock and the market index. (3 points) c) What is the portfolio-specific variance of your portfolio P? (4 points) Now assume you create a portfolio Q. with 50% in portfolio P and 50% in T-bill. d) What is the portfolio-specific variance of your portfolio Q? (4 points) e) What is the covariance between the portfolio Q and the market index? (3 points)