Assume the assumptions of Arbitrage Pricing Theory hold and a three-factor model describes the realized returns. All other risk is diversifiable. Assume that factors are normalized so that E[F1] = E[F2] = E[F3] The risk-free rate is rf = 2% = 0.02 and you are given the multi-factor representation of three risky assets: TA = 0.05 + F1+ EA TB = 0.02 - F1+ F2+ EB TC = 0.085 - 0.5 . F1+ F2 + F3+ Ec where risks EA, ER, Ec are diversifiable/idiosyncratic