Question: Q2 . Assume that stock returns follow a 2-factor structure. The risk-free return is 3%. Portfolio A has average return 8% and factor-betas 0.7 and

Q2. Assume that stock returns follow a 2-factor structure. The risk-free return is 3%. Portfolio A has average return 8% and factor-betas 0.7 and 0.9 (for factor 1 and 2, respectively). Portfolio B has average return 10% and factor betas 1.2 and 1.1 (for factor 1 and 2, respectively). What is the average return for portfolio C that has factor-betas 1 and 1 (for factor 1 and 2, respectively)?

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