The index model has been estimated using historical excess return data for stocks A, B, and C, with the following results:

RA = 0.02 + 0.9RM + eA

RB = 0.04 + 1.2RM + eB

RC = 0.10 + 1.0RM + eC

M = 0.22

(eA) = 0.21

(eB ) = 0.11

(eC ) = 0.23

a.What are the standard deviations of stocks A, B, and C?

b.Break down the variances of stocks A, B, and C into their systematic and firm-specific components.

c.What is the covariance between the returns on each pair of stocks?

d.What is the covariance between each stock and the market index?