Question: suppose the stock market has a 2factor structure the riskfree...
Suppose the stock market has a 2-factor structure. The risk-free rate is 3% and the factor-betas and expected returns on two well-diversified portfolios A and B are given in the table below. What is the expected return on a portfolio with factor 1 beta of 0.8 and factor 2 beta of 1.2?
|Portfolio||Expected return||Factor 1 beta||Factor 2 beta|