Suppose that there are two independent economic factors, F$1$ and F$2.$ The risk$-$free rate is $4\%,$ and all stocks have independent firm$-$specific components with a standard deviation of $41\%.$ Portfolios A and B are both well$-$diversified with the following properties:

Portfolio Beta on F$1$ Beta on F$2$ Expected Return

A $1\mathrm{.}72\mathrm{.}131\%$

B $2\mathrm{.}60\mathrm{.}2126\%$

Required:

What is the expected return$-$beta relationship in this economy? Calculate the risk$-$free rate, rf$,$ and the factor risk premiums, RP$1$ and RP$2$ to complete the equation below.

Note: Do not round intermediate calculations. Round your answers to $2$ decimal places.

E$($rP$)=$ rf $+(\backslash$beta P$1\backslash$times RP$1)+(\backslash$beta P$2\backslash$times RP$2)$