Consider the following data for a one-factor economy. All portfolios are well diversified.

Portfolio E(r) Beta

A 12% 1.2

F 6% 0.0

Suppose that another protfolio E is well diversified with a beta of 0.6 and expected return of 7%.

Construct an arbitrage strategy by investing $1 in the long position and $1 in the short position. What is the profit for the arbitrage strategy?

Your answer should be in dollars and accurate to the hundredth.