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Suppose there are two independent economic factors, M1 and M2. The risk-free rate is 4%, and all stocks have independent firmspecific components with a standard

image text in transcribed Suppose there are two independent economic factors, M1 and M2. The risk-free rate is 4%, and all stocks have independent firmspecific components with a standard deviation of 45%. 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 decimal places.)

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