Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 7%, and all stocks have independent firm-specific components with a standard deviation of 37%. Portfolios A and B are both well-diversified with the following properties:
Portfolio Beta on F1 Beta on F2 Expected Return
A 1.3 1.7 27 %
B 2.2 –0.17 24 %
1. What is the expected return-beta relationship in this economy? (Do not round intermediate calculations. Round your answers to two decimal places. Omit the "%" sign in your response.)