C2. (Arbitrage pricing theory) Suppose the riskless return is 4.5% and the factor sensitivities and factor return premiums for BioTherm and the S&P 500 index are given below. Using the APT, what should be the required returns for BioTherm shares and for the S&P 500 Stock index? BIOTHERM FACTOR SENSITIVITY S&P 500 FACTOR SENSITIVITY EXPECTED FACTOR RETURN PREMIUMS RISK FACTOR Confidence risk Time horizon risk Inflation risk Business-cycle risk Market-timing risk 0.15 0.70 -0.40 1.45 1.20 0.30 0.56 -0.35 1.75 1.00 2.70% -0.70% -4.30% 1.50% 3.60%