Question: Consider the multifactor APT with two factors. Portfolio A has a beta of 1.5 on factor 1 and a beta of 0.45 on factor 2.

Consider the multifactor APT with two factors. Portfolio A has a beta of 1.5 on factor 1 and a beta of 0.45 on factor 2. The risk premiums on the factor 1 and 2 portfolios are 12% and 5%, respectively. The risk-free rate of return is 3%. The expected return on portfolio A is Answer if no arbitrage opportunities exist.

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