Question
Consider the data for a one-factor economy. The risk-free rate is 3%. Well diversified portfolio A has expected return of 0.06 and beta of 3.
Consider the data for a one-factor economy. The risk-free rate is 3%. Well diversified portfolio A has expected return of 0.06 and beta of 3. Well diversified portfolio B has expected return of 0.05 and beta of 0.01. How do you construct a portfolio with zero-investment, zero-beta, and positive risk premium?
| A: 100%, B: -150%, Risk-free: 50% | ||
| A: 100%, B: -66.67%, Risk-free: -33.33% | ||
| There is no arbitrage opportunity | ||
| A: -66.67%, B: 100%, Risk-free: -33.33% | ||
| A: -150%, B: 100%, Risk-free: 50% |
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Global Strategy
Authors: Mike W. Peng
5th Edition
9780357512364
