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Suppose there are two independent economic factors, M_1 and M_2. The risk-free rate is 5%,...

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Accounting

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Suppose there are two independent economic factors, M_1 and M_2. The risk-free rate is 5%, and all stocks have independent firm specific components with a standard deviation of 52%. Portfolios A and B are both well diversified. What is the expected return-beta relationship m this economy? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

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