Question
Assume that both X and Y are well diversified portfolios and the risk-free rate is 4%. Portfolio Expected Return Beta A 8% 0.73 B 9%
Assume that both X and Y are well diversified portfolios and the risk-free rate is 4%.
| Portfolio | Expected Return | Beta |
| A | 8% | 0.73 |
| B | 9% | 1.00 |
In this situation, show how you could create an arbitrage profit. Suppose you initiate this arbitrage trade with a $100,000 position, what would be your trade positions and profits? SHOW ALL WORK.
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Startup CFO The Finance Handbook For Your Growing Business
Authors: Kyle Brennan
1st Edition
1790959403, 978-1790959402
