Problem 7-33 (Static) Suppose there are two independent economic factors, M and The risk-free rate is 7%, and all stocks have independent firm-specific components with a standard deviation of 50%. Portfolios A and B are both well diversified. Portfolio 2 Beta on My Beta on M Expected Return (3) A 1.8 40 2.1 -0.5 8 2.0 10 Required: What is the expected return-beta relationship in this economy? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected retum-beta relationship E(fp) Pp1 . PP2 ces Problem 7-33 (Static) Suppose there are two independent economic factors, M and M. The risk-free rate is 7%, and all stocks have independent firm-specific components with a standard deviation of 50%. Portfolios A and B are both well diversified Portfolio Beta on M Beta on M Expected Return (%) 1.8 48 2.1 -0.5 2.0 10 Required: What is the expected return-beta relationship in this economy? (Do not round intermediate calculations. Round your answers to 2. decimal places.) Expected return-beta relationship E(fp) - Bp1+ Pp2