A There are only two (equally-likely) states of nature in this economy: B F boom and bust, which are driven by a common macro factor F. [Portfolio Return = E(Return) + B*Factor] Boom 125 140 +1 Portfolio A & Bs payoffs are as shown in the table. Apply APT to obtain factor Bust 100 90-1 beta and risk premiums (premia) under no arbitrage condition. t=0 Price 100 100 [i] If there is a portfolio with its factor beta of 0.6, what is the expected rate of return implied by APT? [ii] In order to construct a riskfree portfolio with asset A & B, what should be the portfolio weight(%) on asset B? A There are only two (equally-likely) states of nature in this economy: B F boom and bust, which are driven by a common macro factor F. [Portfolio Return = E(Return) + B*Factor] Boom 125 140 +1 Portfolio A & Bs payoffs are as shown in the table. Apply APT to obtain factor Bust 100 90-1 beta and risk premiums (premia) under no arbitrage condition. t=0 Price 100 100 [i] If there is a portfolio with its factor beta of 0.6, what is the expected rate of return implied by APT? [ii] In order to construct a riskfree portfolio with asset A & B, what should be the portfolio weight(%) on asset B