ay + PRF, converting a well-diversified portfolio Portfolio P) into an arbitrage The CRCNS returns of Portfolio Pan be explained by two can be explained by two factor APT model (ie. Ry STARF . where a, > and E ) ORF, and RF, represent the two and the excess returns of Benchmark and Benchmark 2). In this economy, there is a risk RF,, where a > 0 and (c) free asset, the rate of which is zero (15 points) Suppose ap-3%B, 1.2, and 2 0.8. To construct the arbitrage portfolio by using Portfolio P. do you need to sell or buy the portfolio Show your arbitrage portfolio (.e.. you need to provide the weights of required assets). For this question, assume that your amount of buying or selling Portfolio P is one unit. What is your arbitrage profits (in percentage) 2) Suppose that Portfolio P is not a well-diversified portfolio. Can you implement the same arbitrage trading as in Question 20-1)? Provide your reasons. 3) "No arbitrage principle" is the base of such a multi factor model. Why does the APT model have a practical advantage (compared to CAPM)? ay + PRF, converting a well-diversified portfolio Portfolio P) into an arbitrage The CRCNS returns of Portfolio Pan be explained by two can be explained by two factor APT model (ie. Ry STARF . where a, > and E ) ORF, and RF, represent the two and the excess returns of Benchmark and Benchmark 2). In this economy, there is a risk RF,, where a > 0 and (c) free asset, the rate of which is zero (15 points) Suppose ap-3%B, 1.2, and 2 0.8. To construct the arbitrage portfolio by using Portfolio P. do you need to sell or buy the portfolio Show your arbitrage portfolio (.e.. you need to provide the weights of required assets). For this question, assume that your amount of buying or selling Portfolio P is one unit. What is your arbitrage profits (in percentage) 2) Suppose that Portfolio P is not a well-diversified portfolio. Can you implement the same arbitrage trading as in Question 20-1)? Provide your reasons. 3) "No arbitrage principle" is the base of such a multi factor model. Why does the APT model have a practical advantage (compared to CAPM)