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Problem 14-l6. Consider the following securities and their sensitivities to two factors (the factors have zero means). Assume that the APT holds for the following Mo stocks. Stock A: m = 9 +4F14+2in+eu Stocszrm =7+1Fu+4Fu+em Riskfree:rr=l 14. (5 points) Construct a portfolio out of stocks A and B which is riskless in terms of factor 2. How sensitive is this portfolio to factor 1 (that is, how many units of factor 1 risk)? 15. (5 points) What are the risk premia for factor I and 2 risk, respectively? In other words, what are 1| and h? 16. (5 points) Consider a stock C with the following factor structure: re; = 25 + 31"\" + 4F + ecu structure. In this stock underpriced or overpriced compared to A and B? What is the alpha for this stock