The index model for stocks A and B is estimated with the following results

RA = .03 + .70RM + eA

RB = .02 + 1.2 RM + eB

M = .20; RA-square = .20; RB-square = .12

1) What is the standard deviation of each stock?

2) Break down the variance of each stock to the systematic and firm-specific components.

3) Suppose a portfolio P invests in A and B, and the weights of A and B are 60 and 40 percent respectively. Find the beta for the portfolio.