Suppose that you are converting a well-diversified portfolio (Portfolio P) into an arbitrage portfolio. The excess returns of Portfolio P can be explained by two factor APT model ie, Ry = a; + BRF + BRF, +, where a, > 0 and E() = 0, RF, and RF, represent the two factors and the excess retums of Benchmark 1 and Benchmark 2). In this economy, there is a risk-free asset, the rate of which is zero. (15 points) 1) suppose ap = 0.03,0 = 1.2, and 52 = 0.8. To construct the arbitrage portiolio by using Portfolio P, do you need to sell or buy the portfolio Show your arbitrage portfolio (ie, you need to provide the weights of required assets). For this question, assume that your amount of buying or selling Portfolio P is one unit. What is your arbitrag prants (in percentage)? 2) Suppose that Portfolio P is not a well-diversified portfolio Can you implement the same arbitrage trading as in Question 21-1)? Provide your reasons. 3) "No arbitrage principle" is the base of such a multi factor model. Why does the APT model have a practical advantage Icompared to CAPM)? Suppose that you are converting a well-diversified portfolio (Portfolio P) into an arbitrage portfolio. The excess returns of Portfolio P can be explained by two factor APT model ie, Ry = a; + BRF + BRF, +, where a, > 0 and E() = 0, RF, and RF, represent the two factors and the excess retums of Benchmark 1 and Benchmark 2). In this economy, there is a risk-free asset, the rate of which is zero. (15 points) 1) suppose ap = 0.03,0 = 1.2, and 52 = 0.8. To construct the arbitrage portiolio by using Portfolio P, do you need to sell or buy the portfolio Show your arbitrage portfolio (ie, you need to provide the weights of required assets). For this question, assume that your amount of buying or selling Portfolio P is one unit. What is your arbitrag prants (in percentage)? 2) Suppose that Portfolio P is not a well-diversified portfolio Can you implement the same arbitrage trading as in Question 21-1)? Provide your reasons. 3) "No arbitrage principle" is the base of such a multi factor model. Why does the APT model have a practical advantage Icompared to CAPM)