Use the following information for Problems $9$ through $14.$ Suppose that the index model for stocks A and B is estimated from excess returns with the following results:

RA $=3\%+\mathrm{.}7$RM $+$ eA

RB $=-2\%+1\mathrm{.}2$RM $+$ eB

M $=20\%$; R$-$squareA $=\mathrm{.}20$; R$-$squareB $=\mathrm{.}12$

$$

For portfolio P with investment proportions of $\mathrm{.}60$ in A and $\mathrm{.}40$ in B$,$ rework$$Problems $9,10,$ and $12.$

RA $=3\%+\mathrm{.}7$RM $+$ eA

RB $=-2\%+1\mathrm{.}2$RM $+$ eB

M $=20\%$; R$-$squareA $=\mathrm{.}20$; R$-$squareB $=\mathrm{.}12$

$$

What are the covariance and the correlation coefficient between the two stocks?

RA $=3\%+\mathrm{.}7$RM $+$ eA

RB $=-2\%+1\mathrm{.}2$RM $+$ eB

M $=20\%$; R$-$squareA $=\mathrm{.}20$; R$-$squareB $=\mathrm{.}12$

$$

Break down the variance of each stock into its systematic and firm$-$specific$$components$.$