grows by 5%, while the inflation rate turns out to be 8%, what is your revised estimate of the expected rate of return on the stock? 2. 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 devi- ation of 45%. The following are well-diversified portfolios:     olio Beta on Beta on Expected Return   1.5 2.0 2.2 -0.2       What is the expected return-beta relationship in this economy? 3. Consider the following data for a one-factor economy. All portfolios are well diversified.     olio Beta   12%     0.0     Suppose that another portfolio, Portfolio E, is well diversified with a beta of .6 and ex- pected return of 8%. Would an arbitrage opportunity exist? If so, what would be the ar- bitrage strategy? 4. The following is a scenario for three stocks constructed by the security analysts of Pf Inc.     Scenario Rate of Return (%)   Stoc Price ($) Recession vera   10 20 30 15 25 10 50 12 15 12     a. Construct an arbitrage portfolio using these stocks. b. How might these prices change when equilibrium is restored? Give an example where a change in Stock Cs price is sufficient to restore equilibrium, assuming that the dollar payoffs to Stock C remain the same.