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Suppose there are two independent economic factors, M, and M2. The risk-free rate is 6%, and all stocks have independent firm specific components with a

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Suppose there are two independent economic factors, M, and M2. The risk-free rate is 6%, and all stocks have independent firm specific components with a standard deviation of 54%. Portfolios A and B are both well diversified Portfolio Beta on My Beta on M2 Expected Return (x) What is the expected return-beta relationship in this economy? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Expected retum-beta relationship E(IP) 8P1+ BP2

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