Question: Suppose stock returns are described by a single factor model: ri=E[ri]+iF+i. Assume that the model is already normalized. You observe the returns for the following

Suppose stock returns are described by a single factor model: ri=E[ri]+iF+i.

Suppose stock returns are described by a single factor model: ri=E[ri]+iF+i. Assume that the model is already normalized. You observe the returns for the following two well-diversified portfolios: r1=0.16+1.5Fr2=0.06+0.5F 1 point Derivation of APT section of the APT slides.]

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