Problem 2 (L] Chapter 8 Q6). Assume that the following two-index model describes returns: Ti = rf + bill1 + bi212. Asuume that the following three portfolios are observed; Portfolio bi2 Expected return (%) 10 mo (a) According to APT, what is the expected return, factor-loading relationship for this market? (b) Now consider portfolio D with the following characteristics: rp = 15%, bpi = 2, bp2 = 1. Is an arbitrage opportunity possible? If yes, then describe the arbitrage opportunity