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Assume both portfolios A and B are well-diversified, that the expected return of A is 10% and the expected return of B is 8%. If
Assume both portfolios A and B are well-diversified, that the expected return of A is 10% and the expected return of B is 8%. If the economy has only one factor (the market), and A's beta on that factor is 2, and B's beta on that factor is 1.5. Given this information please provide the risk-free rate and the risk premium on the factor.
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