Assume that all securities in the market follow a single index model. Consider well-diversified portfolio X with E(rX)=15% and X =0.8 and well-diversified portfolio Y with E(rY)=21% and Y =2.0. Do you have an arbitrage strategy in this market if risk free return is 3%? What could be an arbitrage strategy if your answer is yes?

a. Yes. Short portfolio C and buy portfolio X, where portfolio C has T-bills and portfolio Y with weights 0.6 and 0.4, respectively

b. Yes. Short portfolio Y and buy portfolio X

c. No.

d. Yes. Short portfolio C and buy portfolio Y, where portfolio C has T-bills and portfolio X with weights -1.5 and 2.5, respectively e. Yes. Short portfolio X and buy portfolio C, where portfolio C has T-bills and portfolio Y with weights 0.4 and 0.6, respectively