There are two priced factors in an economy, F1 and F2. The risk-free rate is 6%, and all firms have uncorrelated idiosyncratic risk with a standard deviation of 45% each.

Given two well-diversified portfolios A and B, what are the risk premia on F1 and F2 and what is their relation with expected returns?

Portfolio Beta on F1 Beta on F2 Expected Return A 1.5 2.0 31% B 2.2 -0.2 27%