This graph is suspect.It works fine if the lone factor is the Market, as it then essentially shows the Security Market Line.But, what if the one factor is a macroeconomic factor like GDP or interest rates?In APT, macro factors have expected values of zero.Only when there is an unexpected change in that macro factor does Beta kick in to provide contribution to excess return.But, that is not what this graph shows.It shows some positive risk premium contributing to a base return equal to the risk free rate, whereas in APT we expect to have an expected excess return plus a contribution of additional excess return if there are any macro surprises.

Question 1 :how might this graph be redrawn to express the relationship between macro factors and returns more accurately?

Question 2: How do you express the risk premium?

Question 3: How do you express the factor loading?