PLEASE ANSWER B!

I GOT 21% AS THE ANSWER FOR A.

Portfolio . Expected return 12% 17% 2% Sensitivity to BC 2 1 0 Sensitivity to CC -1 2 B No C a. Suppose you construct a well-diversified portfolio D. Its return sensitivities to BC and CC are 3 and -1, respectively. Estimate portfolio D's APT-consistent expected return. (3 marks) b. Suppose you observe an arbitrage opportunity in the market, because portfolio D has an expected return of 18%. How would you exploit the arbitrage opportunity? In other words, design an arbitrage strategy consisting of portfolios A, B, C, and D. Assume that all portfolios are well diversified to the extent that their idiosyncratic risks are negligible, and that all portfolios can be bought on margin or sold short. Portfolio . Expected return 12% 17% 2% Sensitivity to BC 2 1 0 Sensitivity to CC -1 2 B No C a. Suppose you construct a well-diversified portfolio D. Its return sensitivities to BC and CC are 3 and -1, respectively. Estimate portfolio D's APT-consistent expected return. (3 marks) b. Suppose you observe an arbitrage opportunity in the market, because portfolio D has an expected return of 18%. How would you exploit the arbitrage opportunity? In other words, design an arbitrage strategy consisting of portfolios A, B, C, and D. Assume that all portfolios are well diversified to the extent that their idiosyncratic risks are negligible, and that all portfolios can be bought on margin or sold short