What is expected return–beta relationship in economy

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Reference no: EM132007588

Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 5%, and all stocks have independent firm-specific components with a standard deviation of 44%. The following are well-diversified portfolios: Portfolio Beta on F1 Beta on F2 Expected Return A 2.0 2.3 34% B 2.9 –0.23 29% What is the expected return–beta relationship in this economy? (Do not round intermediate calculations. Round your answers to two decimal places. Omit the "%" sign in your response.) E(rP) = % + (?P1 × %) + (?P2 × %)

Reference no: EM132007588

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