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Posted on May 19, 2024

Assume the following: R1t = E(R1) + F1 +2 F2 + e1t R2t = E(R2) + F1 + 3F2 + e2t R3t = E(R3) +

Assume the following:

R1t = E(R1) + F1 +2 F2 + e1t

R2t = E(R2) + F1 + 3F2 + e2t

R3t = E(R3) + 3F1 + F2+ e3t

E(R1) = 19%, and E(R2) = 23%

d. Form a beta portfolio of the first 2 stocks that will be insensitive to factor 2, i.e. F2

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