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Suppose there are two independent economic factors, M 1 and M 2 . The risk-free rate is 6%, and all stocks have independent firm-specific components

Suppose there are two independent economic factors,M1andM2. The risk-free rate is 6%, and all stocks have independent firm-specific components with a standard deviation of 58%. PortfoliosAandBare both well diversified.

PortfolioBeta onM1Beta onM2Expected Return (%)A1.72.437B2.3-0.810

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 relationshipE(rP)=______% +_______P1+_______P2

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