Question 2 (22 marks] Consider three stocks: PUC, KSTAR and IRIS, that have the following factor loadings (factor betas). Stock Inflation factor loading Covid-19 cases factor loading PUC -0.55 1.2 KSTAR -0.10 0.85 IRIS 0.35 The current 3-month treasury bill's return yields 3%, while the risk premia from two risk factors are Inflation - 10%, Covid-19 cases = 8%. Assume that all three stocks are currently priced at $50, determine: 0.5 ) The expected price of these stocks using multi-risk factor model from arbitrage pricing theory. (6 marks) (ii) If you estimated price one year from now for all three stocks shall be $55 for PUC, KSTAR is $52, and IRIS is $57, evaluate whether they are under or overvalued comparatively to their expected returns and state your strategies in an attempt to earn riskless arbitrage profit. (6 marks) (ii) Assume that you wish to create a portfolio with no capital. The portfolio that achieves this has invested 50% in PUC, -100% in KSTAR, and 50% in IRIS. Compute the risk exposure that this portfolio may have from both risk factors. Then, determine whether your strategy yield riskless profits. (10 marks)