1)Consider the multifactor APT with two factors. The risk premium on the factor 1 portfolio is 3%. The risk-free rate of return is 6%. The risk-premium on factor 2 is 7.75%. Suppose that a security A has an expected return of 18.4%, a beta of 1.4 on factor 1 and a beta of .8 on factor 2. Is there an arbitrage portfolio? If not, prove it, if yes exhibit it?

2)In the APT model, what is the nonsystematic standard deviation of an equally-weighted portfolio that has an average value of (ei) equal to 25% and 50 securities?