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4. (10pt) Imagine that a portfolio Manager possessed the following predictions based on securities and macro analyses: Portfolio Expected Return Beta Risk-free 5% 0 Market

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4. (10pt) Imagine that a portfolio Manager possessed the following predictions based on securities and macro analyses: Portfolio Expected Return Beta Risk-free 5% 0 Market 17% 1 P 20% 1.2 where P represents a well-diversified portfolio. Using the three assets above, construct an arbitrage portfolio and explain why your portfolio is an arbitrage portfolio

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