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Suppose there are two independent economic factors, M 1 and M 2 . The risk - free rate is 5 % , and all stocks
Suppose there are two independent economic factors, and The riskfree rate is
and all stocks have independent firmspecific components with a standard deviation of
Portfolios A and are both well diversified.
Required:
What is the expected returnbeta relationship in this economy? Do not round
intermediate calculations. Round your answers to decimal places.
Expected returnbeta relationship
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