Assume that the stock returns of individual stocks A, B, and C are explained by the following two-factor return generating process. However, the correlation coefficient between the two factors F1 and F2 is 0, there is no transaction cost, and there is no restriction on short selling. Answer the questions about the following three assets. ri = E() + B. F + B2F2 Portfolio Bri Bti 1.4 E(r:) 10% A 1.0 B 1.5 1.25 12% 2.0 2.5 20% 1. Construct a portfolio of two stocks, A and B, such that the return is not affected by F2 (i.e., B2 = 0), and calculate the expected return of the portfolio. 2. Construct a portfolio of two stocks, B and C, such that the return is not affected by F2 (i.e., B2 = 0), and calculate the expected return of the portfolio. 3. Based on the results of (1) and (2) above, is there an opportunity for arbitrage? If so, please explain how you can profit from it. 4. When the market is in equilibrium through arbitrage trading as in (3) above, how will the prices of the three stocks A, B, and C be adjusted, respectively? Assume that the stock returns of individual stocks A, B, and C are explained by the following two-factor return generating process. However, the correlation coefficient between the two factors F1 and F2 is 0, there is no transaction cost, and there is no restriction on short selling. Answer the questions about the following three assets. ri = E() + B. F + B2F2 Portfolio Bri Bti 1.4 E(r:) 10% A 1.0 B 1.5 1.25 12% 2.0 2.5 20% 1. Construct a portfolio of two stocks, A and B, such that the return is not affected by F2 (i.e., B2 = 0), and calculate the expected return of the portfolio. 2. Construct a portfolio of two stocks, B and C, such that the return is not affected by F2 (i.e., B2 = 0), and calculate the expected return of the portfolio. 3. Based on the results of (1) and (2) above, is there an opportunity for arbitrage? If so, please explain how you can profit from it. 4. When the market is in equilibrium through arbitrage trading as in (3) above, how will the prices of the three stocks A, B, and C be adjusted, respectively