What is the risk-premium on the unit factor

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Consider the multifactor APT with two risk factors. A well-diversified portfolio A has an expected return of 10%, a beta of 0.75 for factor 1 and a beta of 0.5 for factor 2. The risk premium of the unit factor portfolio for factor 1 is 3.2%. The risk-free rate of return is 5%. What is the risk-premium on the unit factor portfolio for factor 2 if no arbitrage opportunities exist?

Reference no: EM133112500

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