Suppose there are two independent economic factors, M1 and M2. The risk-free rate is 7%, and all stocks have independent firm-specific components...
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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%. Portfolio A and B are both well diversified.

Portfolio Beta on M1 Beta on M2 Expected Return(%)

A 1.8 2.1 40

B 2.0 0.1 10

What is the expected return- beta relationship in this company?

how to calculate it step by step include how to solve 1st and 2nd equation, multiply or divide!

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