Question
9. Consider the single factor APT. Portfolio A has a beta of 1.1 and an expected return of 22%. Portfolio B has a beta of
9. Consider the single factor APT. Portfolio A has a beta of 1.1 and an expected return of 22%. Portfolio B has a beta of 0.6 and an expected return of 18%. The risk-free rate of return is 7%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in ____________ and a long position in ______________.
- Portfolio A; Portfolio B
- Portfolio B; Portfolio A
- Portfolio A; a portfolio consisting of Portfolio A and the risk-free asset
- Portfolio B; a portfolio consisting of Portfolio B and the risk-free asset
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Financial Markets And Institutions
Authors: Frederic S. Mishkin, Stanley G. Eakins
7th Edition
013213683X, 978-0132136839
