The Index Model Has Been Estimated for Stocks a and B

Multiple Choice

The index model has been estimated for stocks A and B with the following results: R_A = 0.03 + 0.7R_M + e_A.
R_B = 0.01 + 0.9R_M + e_B.
$\sigma$ _M = 0.35; $\sigma$ (e_A) = 0.20; $\sigma$ (e_B) = 0.10.
The covariance between the returns on stocks A and B is

A) 0.0384.
B) 0.0406.
C) 0.1920.
D) 0.0772.