Question
Consider the following data for a one-factor economy. All portfolios are well diversified. Portfolio E(r) Beta A 12% 1.2 E 8% 0.6 Assume a risk-free
Consider the following data for a one-factor economy. All portfolios are well diversified.
Portfolio
E(r)
Beta
A
12%
1.2
E
8%
0.6
Assume a risk-free asset exists with expected return of 6%. Does an arbitrage opportunity exist? If so, what is the arbitrage strategy and what is the expected return of the arbitrage strategy?
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The Company Valuation Playbook Invest With Confidence
Authors: Charles Sunnucks
1st Edition
1838470816, 978-1838470814
