Assume that an asset exists with R3 = 15% and ₃ = 1.2. Further assume the security market line discussed in Problem 1. Design the arbitrage opportunity. The SML from Q1 is E[Ri] = 3 + 6*i. Use the following table to explain the arbitrage opportunity.

Position	Cash Invested	Expected Return	Beta
Portfolio =?	-$100 (sell $100 of portfolio C short)	-(.11x100) = - $11	-1.2
Portfolio = ??	+100 (use the $100 from the short sale of C to buy D)	.13 x 100 = $13	+1.2
Arbitrage Portfolio (use this line to verify that you have an arbitrage position)	0 (zero cost)	+$2 (positive return)	0 (zero risk)