Suppose stock returns can be explained by a two-factor model. The firm-specific risks for all stocks are independent. The following table shows the information for two diversified portfolios:

	β1	β2	E(R)
Portfolio A	.82	1.12	16%
Portfolio B	1.42	−.22	14

If the risk-free rate is 3 percent, what are the risk premiums for each factor in this model? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Factor F1_________ %

Factor F2 __________ %

Answer rating: 100% (QA)

As per 2 factor model F1 Risk premium of Factor 1 F2 Ri... View the full answer