Question
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
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?
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Healthcare Finance An Introduction To Accounting And Financial Management
Authors: Louis C. Gapenski
2nd Edition
1567931650, 978-1567931655
