Suppose that a two-factor model, where the factors are the market return (Factor 1) and the growth rate of industrial production (Factor 2), correctly describes the return generating processes of all assets and the corresponding two-factor APT correctly prices three well-diversified portfolios, A, B, and C. Portfolio A B C Expected Return 19% 20% 6% Sensitivity to Factor Sensitivity to Factor 1 2 1.5 1 1 0 2 0 What are i) the risk premiums of the two factors and ii) the risk-free rate? b) Another well-diversified portfolio D has sensitivities 1 to factor 1 and 0.5 to factor 2, respectively. What is the APT-consistent expected return on Portfolio D? c) Suppose that Portfolio D's expected return is 12%. Given your answers above, strategize an arbitrage strategy involving Portfolios A, B, C, and D. (Hint: an arbitrage strategy requires no initial investment, has no risk and yet generates a positive return.)