Question: Consider the multifactor APT. The risk premiums on the factor 1 and factor 2 portfolios are 8% and 6%, respectively. The risk-free rate of return

Consider the multifactor APT. The risk premiums on the factor 1 and factor 2 portfolios are 8% and 6%, respectively. The risk-free rate of return is 4%. Stock A has an expected return of 16% and a beta on factor 1 of 1.3. What is Stock A's beta on factor 2?

You can borrow and lend at the risk-free rate of 4%. The return on the optimal risky portfolio is 12%.What investment strategy will provide you with an expected return of 18%?

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