Suppose there are two independent economic factors, M_(1) and M_(2). The risk-free rate...
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Suppose there are two independent economic factors,
M_(1) and
M_(2). The risk-free rate is
4%, and all stocks have independent firmspecific components with a standard deviation of
53%. Portfolios
A and
B are both well diversified.\ \\\\table[[Portfolio,Beta on
M_(1),Beta on
M_(2),Expected Return (%)],[
A,1.7,1.9,32],[
B,1.8,-0.7,13]]\ Required:\ 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
E(r_(p))=\
%+\
\\\\beta _(P1)+\
\\\\beta _(P2) 
Suppose there are two independent economic factors,
M_(1)and
M_(2). The risk-free rate is
4%, and all stocks have independent firmspecific components with a standard deviation of
53%. Portfolios
Aand
Bare both well diversified.\ \\\\table[[Portfolio,Beta on
M_(1),Beta on
M_(2),Expected Return (%)],[
A,1.7,1.9,32],[
B,1.8,-0.7,13]]\ Required:\ 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
E(r_(p))=\
%+\
\\\\beta _(P1)+\
\\\\beta _(P2) 
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