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.
|Portfolio||Beta on M1||Beta on M2||Expected Return (%)|
What is the expected return–beta relationship in this economy? (Do not round intermediate calculations. Round your answers to 2 decimal places.)