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4. Suppose that there are two independent economic factors, Fland F2. The risk-free rate is 6%, and all stocks have independent firm-specific components with a

4. Suppose that there are two independent economic factors, Fland F2. The risk-free rate is 6%, and all stocks have independent firm-specific components with a standard deviation of 45%. The following are well-diversified portfolios: Portfolio Beta on F1 Beta on F2 Expected Return A 1.5 2.0 31% 2.2 -0.2 27% What is the expected return-beta relationship in this economy? B

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