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Consider the following data for a one-factor economy. All portfolios are well diversified. Portfolio E(r) Beta A 10% 1.0 F. 4% 0 Suppose another portfolio

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

Portfolio E(r) Beta

A 10% 1.0

F. 4% 0

Suppose another portfolio E is well diversified with a beta of 2/3 and expected return of 9%. Would an arbitrage opportunity exist? If so, what would the arbitrage strategy be?

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