Assume both portfoliosAandBare well diversified, thatE(r_A)= 14.4% andE(r_B)= 16.0%. If the economy has only one factor, and_A= 1 while _B= 1.2,What must be the risk-free rate?(Do not round intermediate calculations. Round your answer to 1 decimal place.)

Risk-free rate?%

Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 5% and IR 5%. A stock with a beta of 1 on IP and 0.7 on IR currently is expected to provide a rate of return of 10%. If industrial production actually grows by 6%, while the inflation rate turns out to be 6%, what is your best guess for the rate of return on the stock?(Round your answer to 1 decimal place.)

Rate of return?%

Suppose there are two independent economic factors,M₁andM₂. The risk-free rate is 6%, and all stocks have independent firm-specific components with a standard deviation of 58%. PortfoliosAandBare both well diversified.

PortfolioBeta onM₁Beta onM₂Expected Return (%)A1.72.437B2.3-0.810

What is the expected returnbeta relationship in this economy?(Do not round intermediate calculations. Round your answers to 2 decimal places.)

Expected returnbeta relationshipE(r_P)=?% +?_P1+?_P2

_{solve for the question marks}