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Suppose there are two independent economic factors, M1 and M2 The risk-free rate is 5%,...

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Suppose there are two independent economic factors, M1 and M2 The risk-free rate is 5%, and all stocks have independent firm-specific components with a standard deviation of 56%, Portfolios A and B are both well diversified. Beta on M- 1.7 2.1 Beta on M2 2.2 Portfolio Expected Return (%) 35 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(p) PP1+ P2

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