3. Suppose the index model for stocks A and B is estimated from the excess returns with the following results: rA = 2% + 0.7RM + eA, rB = 2% + 1.5RM + eB, M = 20%, and the regression R2 of stocks A and B is 0.30 and 0.25, respectively. Answer the following questions. Total: 20 marks. (a) What is the variance of each stock? (5 marks) (b) What is the firm-specific risk of each stock? (5 marks). (c) What is the covariance between the two stocks? (5 marks)