1. What is the covariance betweeneach stock and the market return?

2. Break down the variance of eachstock into its systematic and firm-specific components.

Use the following data for the remaining problems. Suppose that the index models for stocks A and B are estimated from excess returns with the following results: RA = 3% +0.7Rm tea, o (CA) = 13% Rp = -2% +1.2RM +eb, o (Cb) = 9% OM 20%