Amy wants to invest in a portfolio and has collected the following information about sensitivity of two stocks. As you are financial management consultant, she approached you and presented this information below. Stock Beta 1 Beta 2 A 1.4 0.75 B -0.90 1.75 Required: a) Assuming the expected risk premium is 7% on factor 1 and 8% on factor 2, Using APT calculate risk premium of each of the stock for Amy. (10 marks) b) Suppose she buys 1000 of stock A and sell 400 of stock B. Calculate the sensitivity of her portfolio to each of the factors and calculate expected risk premium of the portfolio. (15 marks) (Total 25 Marks)