Problem 8 Consider three portfolios (Portfolio1, Portfolio 2 and Portfolio 3) with Returns (rp) and factor sensitivities (bi, b2) given in the following table: Portfolio 1 Portfolio 2 Portfolio 3 rp 0.18 0.15 0.12 bi 1.5 0.5 0.6 b2 0.5 1.5 0.3 a) What are the risk and return of an equally weighted portfolio of the three portfolios (Portfolio 1, Portfolio 2 and Portfolio 3) b) Calculate the risk premia for the two factors and also the risk free interest rate. Problem 8 Consider three portfolios (Portfolio1, Portfolio 2 and Portfolio 3) with Returns (rp) and factor sensitivities (bi, b2) given in the following table: Portfolio 1 Portfolio 2 Portfolio 3 rp 0.18 0.15 0.12 bi 1.5 0.5 0.6 b2 0.5 1.5 0.3 a) What are the risk and return of an equally weighted portfolio of the three portfolios (Portfolio 1, Portfolio 2 and Portfolio 3) b) Calculate the risk premia for the two factors and also the risk free interest rate