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2. Suppose there are two independent risk factors governing securities returns according to the two factor APT. The risk-free rate is 10%. The following well-diversified

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2. Suppose there are two independent risk factors governing securities returns according to the two factor APT. The risk-free rate is 10%. The following well-diversified portfolios exist: beta with respect to factor 1 beta with respect to factor 2 Expected Return Portfolio #1 Portfolio #2 (a) What are the expected returns on each of the two risk factors in this economy? 25% 25%

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