Suppose You Are Working with Two Factor Portfolios,Portfolio 1 and Portfolio

question 6

Multiple Choice

Suppose you are working with two factor portfolios,Portfolio 1 and Portfolio 2.The portfolios have expected returns of 15% and 6%,respectively.Based on this information,what would be the expected return on well-diversified portfolio A,if A has a beta of 0.80 on the first factor and 0.50 on the second factor? The risk-free rate is 3%.

• A)15.2%
• B)14.1%
• C)13.3%
• D)10.7%
• E)8.4%