Consider the following numerical example in which we compare the equilibrium values of the expected rates of return for Security 19 and Security 84 in a two-factor model:

The two quantities of risk for each of the securities, and the two market prices of risk, have the following values:
β19,15 β19,2.8 β84,17 β84,23 λ1.11 λ2.25

(a) Interpret each of the values.

(b) Assume that the rate of return on the government bond is .10. Using this value, the values for the two lambdas, and the values for the two betas for Security 19 and Security 84, calculate the risk-adjusted equilibrium expected rates of return for Security 19 and Security 84.