Suppose that there are two independent economic factors, F1 and F2, the risk-free rate is 6%, and all stocks have independent firm-specific components with a standard deviation of 30%. The following are well-diversified portfolios: Portfolio Beta on F1 Beta on F2 Expected Return A 1.1 1.5 15% B 0.9 0.5 13% What is the expected return-beta relationship in this economy?

Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%, and all stocks have independent firm- specific components with a standard deviation of 53%. Portfolios A and B are both well-diversified with the following properties: Portfolio A B Beta on F1 1.5 2.5 Beta on F2 Expected Return 1.9 -0.19 31% 28% Required: What is the expected return-beta relationship in this economy? Calculate the risk-free rate, rf, and the factor risk premiums, RP1 and RP2 to complete the equation below. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. E(rp) rf+(BP1 x RP1) + (BP2 x RP2) " % RP % RP2 %

Suppose that there are two independent economic factors, F₁ and F₂. The risk-free rate is 6%, and all stocks have independent firm-specific components with a standard deviation of 43%. Portfolios A and B are both well-diversified with the following properties: Portfolio Beta on F1 A 1.9 B 2.8 rf RP1 RP2 Beta on F2 2.2 -0.22 % Expected Return What is the expected return-beta relationship in this economy? Calculate the risk-free rate, rf, and the factor risk premiums, RP₁ and RP2, to complete the equation below. (Do not round intermediate calculations. Round your answers to two decimal places.) E(rp) = rf + (p1 × RP1) + (P2 × RP2) 33% 28%

Suppose that there are two independent economic factors, F, and F2. The risk-free rate is 6%, and all stocks have independent firm-specific components with a standard deviation of 46%. Portfolios A and 8 are both well-diversified with the following properties: Expected Portfolio      Beta on F1     Beta on F2       Es ReturnA                   2.1                   2.4                    35%B                   3.0                  -0.24                  30% What is the expected return-beta relationship in this economy? Calculate the risk-free rate, rf, and the factor risk premiums, RP1 and RP2, to complete the equation below. (Do not round intermediate calculations. Round your answers to two decimal places.) Blrp) = r¢ + (Ber * RP1) + (Bp2 * RP2)   Please see attached image for more details.

Suppose that there are two independent economic factors, F₁ and F₂. The risk-free rate is 6%, and all stocks have independent firm- specific components with a standard deviation of 45%. The following are well-diversified portfolios: Portfolio Beta on F1 A B E(rp) 1.5 2.2 = What is the expected return-beta relationship in this economy? (Do not round intermediate calculations.) Beta on F2 2.0 -0.2 % + (Bp1 x Expected Return 31% 27% %) + (Bp2 x

Assume that both portfolios A and B are well diversified, that E(rA) = 12%, and E(rB) = 9%. If the economy has only one factor, and βA = 1.2, whereas βB = .8, what must be the risk-free rate?

Suppose that there are two independent economic factors, F₁ and F₂. The risk-free rate is 6%, and all stocks have independent firm- specific components with a standard deviation of 46%. Portfolios A and B are both well-diversified with the following properties: Portfolio A B Beta on F1 2.1 3.0 rf RP1 RP2 Beta on F2 2.4 -0.24 % % % Expected Return What is the expected return-beta relationship in this economy? Calculate the risk-free rate, rf, and the factor risk premiums, RP₁ and RP2, to complete the equation below. (Do not round intermediate calculations. Round your answers to two decimal places.) E(rp) = rf + (Bp1 × RP₁) + (Bp2 × RP2) 35% 30%

Suppose that there are two independent factors, F1 and F2. The risk-free rate is 3%, and all stocks have independent firm-specific components with a standard deviation of 42%. Portfolios A and B are both well-diversified with the following properties:  Portfolio Beta on F1 Beta on F2 Expected Return A 1.8 2.1 32% B 2.7 -0.21 27% What is the expected return-beta relationship in this economy? Calculate the risk-free rate, rf, and the factor risk premiums, RP1 and RP2, to complete the equation below (write answers as percentages, rounded to two decimal places).  E(rp) = rf + (BP1 X RP1) + (BP2 X RP2) (Note: B = Beta) rf ?% RP1 ?% RP2 ?%

Consider the following data for a one-factor economy. All portfolios are assumed to be well diversified. Portfolio.                        A.                   F Expected return         12%                6% Beta.                            1.2               0.0 Suppose that another portfolio, portfolio E, is well diversified with a beta of 0.6 and expected return of 8%. Would an arbitrage opportunity exist? If so, what would be the arbitrage strategy? (Note: show what the percentage profit from arbitrage will be)

Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%. The following are well-diversified portfolios: Portfolio Beta on F1 Beta on F2 Expected Return A 1.5 2.0 31% B 2.2 -0.2 27%   [i].      What is the risk premium for F1?