Suppose we have the following Index Model for equity securities A and B based on estimates from excess returns: a) Compute the variances and standard deviations of the two stocks A and B; b) Breakdown...

Suppose we have the following Index Model for equity securities A and B based on estimates from excess returns:

a) Compute the variances and standard deviations of the two stocks A and B;

b) Breakdown the total variance to each security into the systematic and unsystematic components;

c) Calculate the covariance of each security and the market;

d) Determine the covariance between the two stocks A and B;

e) Evaluate the correlation coefficient of the two stocks A and B and appraise it.