Question: Assume that you are using a two-factor APT model to find the expected return on a well-diversified portfolio Q that promises an expected return of

Assume that you are using a two-factor APT model to find the expected return on a well-diversified portfolio Q that promises an expected return of 18%. The relevant factor portfolios, their betas, and their factor risk premiums are shown in the table below. The assumed risk-free rate is 3.5%.

Factor	Factor Beta	Factor risk premium
A	1.4	12.0%
B	0.8	-3.5%

What is the arbitrage strategy?

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