which concept is this question testing? following, question, expected, testing

defour44

I have no idea whats this question is on about?
are the inputs in APT the differentials between expected change and actual change?
A two-stock portfolio consists of the following:
The portfolio consists of stock of Green Company (portfolio weight 30%) and Blue Company (portfolio weight 70%).
Green’s expected return is 12%, Blue’s is 8%.
Interest rates are expected to be 6%.
Oil prices are expected to rise 2%.
The two-factor model for Green Company is R(green) = 12% ? 0.5 Fint ? 0.5 Foil + egreen
The two-factor model for Blue Company is R(blue) = 8% + 0.8 Fint + 0.4 Foil + eblue
If interest rates are actually 9% and oil prices do not rise, the return on the portfolio will be:
A) 12.89%.
B) 10.55%.
C) 10.17%.
Your answer: A was incorrect. The correct answer was C) 10.17%.
R(green) is [12 ? (0.5