Suppose that the index model for stocks a and b is, Financial Management

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Suppose that the index model for stocks a and b is

Suppose that the index model for stocks A and B is estimated from excess returns with the following results:

RA = 2% + 0.40RM + eA

RB = -1.8% + 0.90RM + eB

sM = 15%; R-squareA = 0.30; R-squareB = 0.22

What are the covariance and correlation coefficient between the two stocks? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answers to 4 decimal places.)

Covariance

Correlation coefficient

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