Suppose there are two independent economic factors, $M_1$ and $M_2.$ The risk$-$free rate is $7\%,$ and all stocks have independent firm$-$

specific components with a standard deviation of $43\%.$ 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 $E(r_P)=$