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Consider the following data for a single-factor economy. Both portfolios K and F, are well diversified and fairly priced: Suppose another portfolio D is also

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Consider the following data for a single-factor economy. Both portfolios K and F, are well diversified and fairly priced: Suppose another portfolio D is also well diversified with a beta of 4/5 and expected return of 11%. Would an arbitrage opportunity exist? If so, what would the arbitrage strategy be? [4 Marks]

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