# Question: suppose the stock market has a 2factor structure the riskfree...

###### Question details

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 |

A | 8.13% | 0.7 | 1.1 |

B | 10.90% | 0.8 | 2 |