There are N0=20 assets in the market, consider the following two-factor model

ri=E(ri)+i,1f1+i,2f2+i

The assets have the following structure:

1. i,1=0.7 for all i=1,2,3...N0

2. i,2=0.6 for all i=1,3,5...N01

3. i,2=1.4 for all i=2,4,6...N0

4. All assets have the same standard deviation 3.6% for idiosyncratic risk , i.e., SD(i)=3.6% for all i=1,2,3...N0

Let's consider a portfolio with equal weights on all assets.

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(a) Compute the factor loading of the portfolio on factor 1.

(b) Compute the factor loading of the portfolio on factor 2.

(c) Compute the standard deviation of idiosyncratic risk of the portfolio. (

d) If N0=50 , compute the factor loading of the portfolio on factor 1.

(e) If N0=50 , compute the factor loading of the portfolio on factor 2.

(f) If N0=50 , compute the standard deviation of idiosyncratic risk of the portfolio.