Question: Consider the multifactorial APT with two factors. The risk premiums of factor 1 and factor 2 portfolios are respectively 5% and 3%. Stock A has

Consider the multifactorial APT with two factors. The risk premiums of factor 1 and factor 2 portfolios are respectively 5% and 3%. Stock A has a beta of 1.4 at factor 1, and a beta of 0.5 in factor 2. The expected return on stock A is 14%. If there is no arbitration opportunities exist,

Calculate the risk-free rate of return

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