Question: Portfolio Beta on M 1 Beta on M 2 Expected Return (%) A 1.7 2.4 37 B 2.3 -0.8 10 Suppose there are two independent

Portfolio Beta on M1 Beta on M2 Expected Return (%)
A 1.7 2.4 37
B 2.3 -0.8 10

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 58%. Portfolios A and B are both well diversified.

What is the expected returnbeta relationship in this economy? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Expected returnbeta relationship E(rP) = 6% + (?)P1 + (?)P2

Please fill in the question marks in the equation.

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