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Consider the two-factor APT. Portfolio A has a beta of 1.3 on factor 1 and a beta of 0.5 on factor 2. The expected returns
Consider the two-factor APT. Portfolio A has a beta of 1.3 on factor 1 and a beta of 0.5 on factor 2. The expected returns on factors 1 and 2 are 12% and 8%, respectively. The expected return on portfolio A is 9%. No arbitrage opportunities exist. What is the risk-free rate of return? Submit your answer in percentages, rounding up to two decimals (in XX.XX format).
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