finance
posted by Anonymous .
Consider the following data for a onefactor economy. All portfolios are well
diversi ed.
Table 1: Onefactor Economy
Portfolio E(r) Beta
A 10% 1.0
F 4 0
Suppose another portfolio E is well diversi ed with a beta of 2/3 and expected return of
9%. Would an arbitrage opportunity exist? If so, what would the arbitrage strategy be?
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