Question: please solve the answer in detail its very important dont just write the formula 3. Assume stock returns are explained by a two-factor model as

please solve the answer in detail its very important dont just write the formula

3. Assume stock returns are explained by a two-factor model as follows: R = 2, + 1.*2, + 1.*, The following three stocks are in equilibrium. Return Stock % Beta 1 Beta2l U 101 0.6 0.81 V 161 1.6 1.81 WI 15 1.8 0.9 a) Derive the equilibrium model equation. b) Assume there is stock J with beta 1 of 1 and beta 2 of 1.2. Stock J's rate of return is 14.4%. Is stock J in equilibrium? If not determine an arbitrage strategy and calculate the arbitrage profit. Show the proper weight of each stock

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