Suppose a Sizeable,fully Diversified Portfolio Has an F₁ Beta of .9,an

Multiple Choice

Suppose a sizeable,fully diversified portfolio has an F₁ beta of .9,an F₂ beta of 1.4,and an expected return of 11.6 percent.If F₁ turns out to be 1.1 percent and F₂ is −.8 percent,what will be the actual rate of return based on a two-factor arbitrage pricing model?

A) 12.05 percent
B) 11.47 percent
C) 11.72 percent
D) 12.32 percent
E) 12.58 percent