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Suppose there are two independent economic factors, M, and My. The risk-free rate is 7%, and all stocks have independent firm- specific components with a

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Suppose there are two independent economic factors, M, and My. The risk-free rate is 7%, and all stocks have independent firm- specific components with a standard deviation of 55% Portfolios A and B are both well diversified. Portfolio Beta on MA 1.7 2.0 Beta on M2 2.1 -0.8 Expected Return (X) 34 15 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 (P) 9 BP1. BP2

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