Question: Consider a one-factor Arbitrage Pricing Theory model. There are two well- diversified portfolios: A and B. Portfolio As expected return is 20 percent and its

Consider a one-factor Arbitrage Pricing Theory model. There are two well- diversified portfolios: A and B. Portfolio As expected return is 20 percent and its A is 0.75; Portfolio Bs expected return is 10 percent and its B is 0.25. What is the risk-free rate in the model?

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