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Suppose there are two independent economic factors, M 1 and M 2 . The risk - free rate is 4 % , and all stocks

Suppose there are two independent economic factors, M1 and M2. The risk-free rate is 4%, and all stocks have independent firmspecific components with a standard deviation of 57%. Portfolios A and B are both well diversified.
\table[[Portfolio,Beta on M1,Beta on M2,Expected Return (%)
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