Question

Suppose there are two independent economic factors, M1 and M2. The risk-free rate is 6%, and all stocks have independent firm-specific components with a standard deviation of 54%. Portfolios A and B are both well diversified.Portfolio Beta on M1 Beta on M2 Expected Return (%)A 1.7 2.0 33B 1.9 -0.8 14What 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(rP) =__ % + ___ βP1 + ___ βP2

Answer 1

37%

Step-by-step explanation:

the % sigh isn't needed only if you need it for the assignment.