a) b) Suppose that a well-diversified portfolio has an expected return of 27% and that the...

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a) b) Suppose that a well-diversified portfolio has an expected return of 27% and that the following two factors have an impact on this portfolio's returns: changes to GDP (F₁), and to unexpected inflation (F2). The risk-free rate is 9%. The APT equation is E (Rp) = R + B1(F1 - R ) + B2(F2 - R) = 0.09 + B1(0.035) + B2(0.185) Suppose that the sensitivity of the well-diversified portfolio to GDP is (-0.85). What isits sensitivity to unexpected inflation? If one rebalances this well-diversified portfolio, such that the expected return remains the same but the exposure to inflation is reduced to zero, what will its sensitivity to GDP be? a) b) Suppose that a well-diversified portfolio has an expected return of 27% and that the following two factors have an impact on this portfolio's returns: changes to GDP (F₁), and to unexpected inflation (F2). The risk-free rate is 9%. The APT equation is E (Rp) = R + B1(F1 - R ) + B2(F2 - R) = 0.09 + B1(0.035) + B2(0.185) Suppose that the sensitivity of the well-diversified portfolio to GDP is (-0.85). What isits sensitivity to unexpected inflation? If one rebalances this well-diversified portfolio, such that the expected return remains the same but the exposure to inflation is reduced to zero, what will its sensitivity to GDP be?