1 consider the multi-factor apt with two factors portfolio, Ask an Expert

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1. Consider the multi-factor APT with two factors. Portfolio A is well-diversifed and has a beta of 0.75 on factor 1 and a beta of 0.5 on factor 2. The risk premiums on factos 1 and 2 are 2% and 3% respectively. The risk free rate of return is 6%. the expected return on portfolio A is _____ if no arbitrage opportunities exist.

2. Bank A has an ROA of 1.15% and bank B has an ROA of 1.09%, does bank A have a Favorable or Unvaorable ROA compared to bank B? Explain your reasoning.

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