Problem $12-10$ APT

Assume that the returns on individual securities are generated by the following twofactor model:

$R_{it}=E(R_{it})+{}_{ij}{F}_{1t}+{}_{i2}{F}_{2t}$

Here:

$R_{it}$ is the return on Security $i$ at Time t$.$

$F_{1t}$ and $F_{2t}$ are market factors with zero expectation and zero covariance.

In addition, assume that there is a capital market for four securities$,$ and the capital market for these four assets is perfect in the sense that there are no transaction costs and short sales $($i$.$e$.,$ negative positions$)$ are permitted. The characteristics of the four securities follow:

$\backslash$table$[[$Security$,{}_1,{}_2,E(R)$