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2. Investors have three types of securities, each with a market value of 4 million. The expected rate of return and beta are listed below.
2. Investors have three types of securities, each with a market value of 4 million. The expected rate of return and beta are listed below. please find an arbitrage portfolio securities expected rate of return beta A 12% 0.8 B 14% 1.1 16% 1.6 3. Consider the single factor arbitrage model. Assume that the beta value of security A is 1, and the expected rate of return is 16%; the beta value of security B is 0.8, and the expected rate of return is 12%; the risk-free rate of return is 6%. If you want to take advantage of arbitrage opportunities, which security should you short (sell) and which security should be long (buy)
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