Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%, and...

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Finance

Suppose that there are two independent economic factors,F₁ and F₂. The risk-freerate is 6%, and all stocks have independent firm-specificcomponents with a standard deviation of 46%. Portfolios Aand Bare both well-diversified with the followingproperties:
Portfolio Beta on F₁ Beta on F₂ Expected Return
A 2.1 2.4 35%
B 3.0 –0.24 30%
What is the expected return-beta relationship in this economy?Calculate the risk-free rate, r_f, and thefactor risk premiums, RP₁ andRP₂, to complete the equation below.(Do not round intermediate calculations. Round your answersto two decimal places.)
E(r_P) = r_f +(?_P₁ × RP₁)+ (?_P₂ ×RP₂)
rf =?%
RP1 = ?%
RP2 = ?%

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Suppose that there are two independent economic factors,F1 and F2. The risk-freerate is 6%, and all stocks have independent firm-specificcomponents with a standard deviation of 46%. Portfolios Aand Bare both well-diversified with the followingproperties:PortfolioBeta on F1Beta on F2Expected ReturnA2.12.435%B3.0–0.2430%What is the expected return-beta relationship in this economy?Calculate the risk-free rate, rf, and thefactor risk premiums, RP1 andRP2, to complete the equation below.(Do not round intermediate calculations. Round your answersto two decimal places.)E(rP) = rf +(?P1 × RP1)+ (?P2 ×RP2)rf =?%RP1 = ?%RP2 = ?%

Portfolio		Beta on F₁		Beta on F₂		Expected Return
	A		2.1		2.4		35%
	B		3.0		–0.24		30%