Short Question $($SQ$4)$

$(15\%)$

Suppose asset returns are driven by three factors, GDP growth rate $($factor $1)$ and interest rate $($factor $2),$ and Oil prices $($factor $3),$ which are uncorrelated with one another. There are two well$-$diversified portfolios A and B and one stock C of interest. Their factor sensitivities are given in the following table, and so are the risk premia of the tracking portfolios for Factor $1,2,$ and $3.$

$\backslash$table$[[,\backslash$table$[[$Factor Sensitivity for$],[$Factor $1]],\backslash$table$[[$Factor Sensitivity for$],[$Factor $2]],\backslash$table$[[$Factor Sensitivity$],[$for Factor $3]]],[$Portfolio A$,b_{A1}=+1\mathrm{.}2,b_{A2}=0\mathrm{.}5,b_{A3}=0\mathrm{.}3$