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Section C (4 Mark)Consider the multifactor APT.

Section C (4 Mark)

Consider the multifactor APT. There are two independent economic factors, F1 and F2. The risk-free rate of return is 6%. The following information is available about two well-diversified portfolios:

Assuming no arbitrage opportunities exist, the risk premium on the factor F1 portfolio should be __________.

A.

3%

B.

4%

C.

5%

D.

6%

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