Problem 1: The index model has been estimated for stocks A and B with the following results: RA= -0.06 + 0.85RM+ eA RB= 0.03 + 2.95RM+ eB The standard deviation of the market index is 18%; the residual standard deviation of the error terms for stock A is 44%; the residual standard deviation of the error terms for stock B is 35%. What is the covariance between the returns on stocks A and B? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

Problem 4: Using the data from problem 1, you want to form a complete portfolio with 40% invested in Stock A, 45% invested in Stock B, and 15% invested in a riskfree asset with expected return of 3%, beta of 0, and residual standard deviation of 0%. Using the Index Model, what is your estimate of the standard deviation of this complete portfolio? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter 12.35 in the answer box.

need help with problem 4