According to aibitrage pricing theory, assume the following model is appropriate to estimate returns in the market:

Assume we beleive a 1 factor APT model describes securities returns. Consider 2 assets with the following data Security Expected Return 4.66% 14.78% Beta 10.1 2.3 Suppose the relevant variances are: Component Systematic Factor Variance 0.0141 0.0281 0.0101 1. The beta of an equally weighted portfolio is: 2. The the variance of an equally weighted portfolio is (answer exactly): EU 3. Compute the risk free rate : R; = Hi + Bi(Rm pm) + Ei where Ri and RM are the return on the ith asset and on the market respectively. of the market return is 0.01. The actual market return is 7%. Assume we beleive a 1 factor APT model describes securities returns. Consider 2 assets with the following data Security Expected Return 4.66% 14.78% Beta 10.1 2.3 Suppose the relevant variances are: Component Systematic Factor Variance 0.0141 0.0281 0.0101 1. The beta of an equally weighted portfolio is: 2. The the variance of an equally weighted portfolio is (answer exactly): EU 3. Compute the risk free rate : R; = Hi + Bi(Rm pm) + Ei where Ri and RM are the return on the ith asset and on the market respectively. of the market return is 0.01. The actual market return is 7%