What are the sensitivities of the portfolio


Problem:

Based on a three-factor model, consider a portfolio composed of three securities with the following characteristics:

Security    Factor 1 Sensitivity    Factor 2 Sensitivity    Factor 3 Sensitivity    Proportion

A    -0.2    3.6    0.05    0.6
B    0.5    10    0.75    0.2
C    1.5    2.2    0.3    0.2

What are the sensitivities of the portfolio to factors 1, 2, and 3?

Based on a one-factor model, two proportions, A and B, have equilibrium expected returns of 9.8% and 11.0% respectively. If the factor sensitivity of portfolio A is .8 and that of portfolio B is 1.0, what must the risk rate be?

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Finance Basics: What are the sensitivities of the portfolio
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