Question: Consider a three-factor APT model with non-self-financing factors. The table below provides the expected return for each of the factors, the beta of Stock A

Consider a three-factor APT model with non-self-financing factors. The table below

Consider a three-factor APT model with non-self-financing factors. The table below provides the expected return for each of the factors, the beta of Stock A with each of the factors, and the beta of Stock B with each of the factors. The risk- free rate is 1.5%. Use this model to estimate the expected return on a portfolio with equal investments in Stock A and Stock B. Factor Expected Return Beta for A Beta for B F1 7.8% 0.94 0.34 F2 5.6% -0.33 1.06 F3 11.6% 0.40 -0.26 8.16% 8.59% 7.74% 7.31% 6.88%

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