2. ) There is a well-diversified portfolio C with 1 = 1 and 2 = 0.5. It has a forecasted return of 12%. Could you indicate an arbitrage transaction that makes profit? If the answer is yes, justify your answer by explaining how to form the transaction.

Given a two-factor economy. Assets A and B are well-diversified portfolios. The riskfree rate is 1%. The standard deviations of the excess return of factor portfolios 1 and 2 are 18% and 15% respectively. The two factor portfolios are uncorrelated