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12 Suppose there are two independent economic factors, M, and My. The risk-free rate is 4%, and all stocks have independent firm specific components with

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12 Suppose there are two independent economic factors, M, and My. The risk-free rate is 4%, and all stocks have independent firm specific components with a standard deviation of 45%. Portfolios A and B are both well diversified. Portfolio Beta on pected Return 10 points Beta on My 1.5 2.0 35 13 Swipe What is the expected retur-bota relationship in this economy? (Do not round intermediate calculations. Round your answers to 2 decimal places.) book Print % Expected retum-beta relationship EP) SP2 BP1

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