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Assume that both X and Y are well-diversified portfolios and the risk-free rate is 4%. Portfolio Expected Return Beta X 8.75% 0.75 Y 10% 1.00

Assume that both X and Y are well-diversified portfolios and the risk-free rate is 4%.

Portfolio

Expected Return

Beta

X

8.75%

0.75

Y

10%

1.00

If you wish to take a $100,000 arbitrage position, how much money would you expect to make? CORRECT ANSWER IS D, PLEASE SHOW STEPS

A. $1,000.00

B. $500.00

C. $750.00

D. $250.00

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