Question: Consider the multifactor APT with two factors. There is a well - diversified portfolio P , with expected return of 1 5 % . The

Consider the multifactor APT with two factors. There is a well-diversified portfolio P, with expected return of 15%. The risk free rate is 5%. The portfolio has a beta of 1.5 on factor 1 and beta 2.5 on factor 2. The risk premiums on the factor 1 and 2 portfolios are 2% and 4% respectively. What is the alpha?

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