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 1.2%. Use this model to estimate the expected return on a portfolio with equal investments in Stock A and Stock B. Beta Beta Factor Expected Return for A for B F1 11.4% 0.74 0.48 F2 9.0% -0.25 0.88 F3 6.6% 0.41 -0.35 O 10.59% O 10.04% 11.15% O 11.70% 09.49%

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