Suppose that a single factor APT holds. The risk-free rate is 4% and the expected return on a portfolio with unit sensitivity (sensitivity equal to 1) to the factor is 7%. Consider a portfolio of two securities with the following characteristics:
Security Sensitivity to the factor Proportion in the Portfolio
A 0.8 0.3
B 1.7 0.7
According to APT, what is the portfolio's equilibrium expected return?