Suppose there are two independent economic factors, M1 and M2. The risk-free rate is 4%, and all stocks have independent firm-specific components with a standard deviation of 41%. Portfolios A and B are both well diversified. Portfolio Beta on M1 Beta on M2 Expected Return (%) A 1.8 2.3 31 B 2.2 -0.5 9 What is the expected returnbeta relationship in this economy? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

ny work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion. Return to question Suppose there are two independent economic factors, M and M2. The risk-free rate is 4%, and all stocks have independent firm- specific components with a standard deviation of 41%. Portfolios A and B are both well diversified. Portfolio Beta on 1.8 2.2 Beta on 2 2.3 -0.5 Expected Return (%) 31 9 8 What is the expected return-beta relationship in this economy? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Answer is complete but not entirely correct. Expected retum-beta relationship E(TP) = IBP1 4.00 4.19 X 8.46 SP2 +