APT - how to determine percentage of allocation? I thought it should be given

CFA Level II
#1

CFA curriculum Reading 47 An Introduction to Multifactor Models, page 308 EOC question 8-14

Fund Expected Return Factor Sensitivity

A 0.02 0.5

B 0.04 1.5

C 0.03 0.9

Question 9: The arbitrage opportunity identified by Zapata can be exploited with…

#2

I just start with 50/50 of lowest E® and highest E®. Logically that’s the only combo possible that could be compared with the remaining portfolio. (Two lows can’t beat a high and two highs will always beat a low. Therefore look at the highest+lowest vs. Middle.)