"There are two independent factors in the economy, F1 and F2, and the betas for Portfolio X on these factors are 1 and 2 respectively. For Portfolio Y, the betas on the two factors are 2 and 1 respectively. The expected returns of X and Y are 6.5% and 7% respectively. If the risk-free rate is 3%, what is the expected return of Portfolio Z that has beta of 1 on F1 and beta of 1 on F2?"

		5.50%
		6.50%
		7.50%
		None of the above

"Consider a two factor APT model. Aloha corp. has a beta of 1.5 for the first factor and 2 for the second factor, and an expected return of 20%. The risk premium for the first factor is 6% and the risk premium for the second factor is 4%. Another firm, Honululu corp. has a beta of 2 for the first factor and 2 for the second factor. If the actual forecasted return for Honululu corp is 27%, how should you trade Honululu?"

		Sell
		Buy
		Neither buy or sell
		None of the Above