Assume that the single index model holds for all securities and an investor comes up with the following equation for the return of a well diversified portfolio P. 19% 1.2 where Rs is an excess return on the market. The risk free rate is 2% and the expected return on the market is 13% (10 points) a. Does APT hold for portfolio P. and why? b. Does an arbitrage opportunity exist in this economy? If so, construct an arbitrage strategy c. Now suppose that portfolio P is not well-diversified so that 7,19% 1.2 Rute where ep is the unexpected firm-specific risk for the portfolio P. Does an arbitrage opportunity exist in this market? Why? If so, construct an arbitrage strategy