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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, M and M The riskfree rate is and all stocks have independent firmspecific components with a standard deviation of Portfolios A and B are both well diversified.
Portfolio Beta on M Beta on M Expected Return
A
B
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What is the expected returnbeta relationship in this economy? Do not round intermediate calculations. Round your answers to decimal places.
Expected Returnbeta relationship ErpBpBp
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