Consider the multifactor APT with two factors. Portfolio A has a beta of .5 on factor 1 and a beta of 1.25 on factor 2. The risk premiums on the factor 1 and 2 portfolios are 1% and 7%, respectively. The risk-free rate of return is 7%. The expected return on portfolio A is 18%. How would you contruct an arbitrage portfolio?

Question 15 options:

	short portfolio A
	long the first factor
	long the second factor
	borrow from the T-bill market
	none of the above