Assume that a one-factor model describes returns and that the following two well- diversified portfolios are observed Portfolio Expected Returns A B 11% 5% a) Find the equation that must describe APT equilibrium returns. b) Suppose a portfolio was quoted on the market with the following information Portfolio C Expected Return b 1.8 0.6 4% bj> 1.0 Is this an equilibrium return? If not, what arbitrage between A, B, and C would occur? (Hint: Construct a portfolio from A and B that has the same b; as C). Explain your answer.