Question: a 10. Consider the multifactor APT with two factors. A well-diversified portfolio Q has a beta of 1.5 on factor 1, and a beta of

a 10. Consider the multifactor APT with two factors. A well-diversified

a 10. Consider the multifactor APT with two factors. A well-diversified portfolio Q has a beta of 1.5 on factor 1, and a beta of 1.2 on factor 2. The risk premiums on the factor 1 and factor 2 portfolios are 4% and 3% respectively. The risk-free rate of return is 2%. What is the risk premium on portfolio Q if no arbitrage opportunities exist? a. 11.60% b. 9.60% c. 7.60% d. 8.60% 10.60% (3 marks) e

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