Suppose that the index model for stocks a and b is


Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 1.0% + 0.45RM + eA RB = –1.0% + 1RM + eB σM = 16%; R-square A = 0.28; R-square B = 0.21 Break down the variance of each stock to the systematic and firm-specific components. (Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. Round your answers to 4 decimal places.)

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Financial Management: Suppose that the index model for stocks a and b is
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