Suppose that the index model for stocks A and B is estimated from excess returns with the following results: Ra : 3% + 0.7 Rm + ea Rs--2% + 1.2 Rm + eb What is the standard deviation for each stock? Break down the variance of each stock to the systematic and firm-specific components What are the covariance and correlation coefficient between the two stocks? What is the covariance between each stock and the market index? Are the intercepts of the two regressions consistent with the CAPM? Interpret their values. a. b. c. d. e