Question: Assume that the single index model is valid. You've collected the following information about excess returns for two stocks, A and B, their residual standard

Assume that the single index model is valid. You've collected the following information about excess returns for two stocks, A and B, their residual standard deviations, and the standard deviation of the macroeconomic factor, M:

RA = -0.1 + 0.9 RM + eA

RB = 0.2 + 1.2 RM + eB

(eA) = 0.4

(eB) = 0.2 M = 0.26

Part 1 - What is the standard deviation of stock A? 3+ decimals

Part 2 - What is the standard deviation of stock B? 3+ decimals

Part 3 - What is the covariance between the returns on stocks A and B?

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