Suppose that there are two independent economic factors, F₁ and F₂. The following are three securities:

Security X Y Z

Beta on factor 1 1.5 2.2 1

Beta on factor 2 2.0 -0.2 3

Expected return 0.35 0.27 0.40

1. Write down the factor models for securities X, Y, and Z.
2. Write down the factor model for a portfolio composed of W₁ units of X, W₂ units of Y, and W₃ units of Z.
3. Construct a portfolio whose beta on factor one is 1 and whose beta on factor two is 0. What is its expected return?