Suppose there are two independent economic factors, M₁ and M₂. The risk-free rate is 7%, and all stocks have independent firm-specific components with a standard deviation of 50%. Portfolios A and B are both well diversified. Portfolio Beta on M₁ Beta on M2 Expected Return (%) A 1.8 40 2.1 -0.5 B 2.0 10 Required: What is the expected return-beta relationship in this economy? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected return-beta relationship E(rp) = % + Bp₁ + BP2