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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, M1 and M2. The risk-free rate is 5%,
and all stocks have independent firm-specific components with a standard deviation of
52%. Portfolios A and B are both well diversified.
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(rP)=
5.00
%+
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