Return to equation (14.34). Recall that both i1 and i2 have the properties of chapter 5, V(i1)

Return to equation (14.34). Recall that both εi1 and εi2 have the properties of chapter 5, V(εi1) = V(εi2) and COV(εi1, εj2) = 0 for all i and j.

(a) Use the rules of expectations to verify that E(εi2 − εi1) = 0.

(b) Use the rules of variances to verify that V(εi2 − εi1) is the same for all i.

(c) Use the rules of covariances to verify that COV[(εi2 − εi1), (εj2 − εj1)] is zero for all i and j.