Consider that all securities in the market follow a single index model. Consider well diversified portfolio A with E(rA)=12% and A =0.9 and a portfolio B with E(rB)=24% and B =1.5. Portfolio B has a portfolio specific risk. Do you have an arbitrage strategy in this market if risk free return is 3%. Why?

a.Yes, because slopes of portfolios are the same

b. Yes, because slopes of portfolios are different

c. No, because portfolio B is not well diversified

d. No, because investors are risk averse

e. No, because slopes of portfolio are different