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The index model has been estimated for stocks A and B with the following results:RA = 0.03 + 0.7RM + eA. RB = 0.01 + 0.9RM + eB.
ΣM = 0.35; σ(eA) = 0.20; σ(eB) = 0.10.
The covariance between the returns on stocks A and B is
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