Question
Consider two well-diversified portfolios, A and C, r f = 4%, E ( r A ) = 10%, E ( r C ) = 6%,
Consider two well-diversified portfolios, A and C,
rf = 4%, E(rA) = 10%, E(rC) = 6%, bA = 1, bC =
If the maximum amount you can borrow is $1,000,000, what is your arbitrage strategy and profit?
| A. | Long 1 A , short 0.5 C , short 0.5 rf, profit=$5,000 | |
| B. | Long 1C , short 0.5 A, short 0.5 rf, profit=$5,000 | |
| C. | Long 0.5 C, Long 0.5 rf, short 1 A, profit=$10,000 | |
| D. | Long 0.5 A, Long 0.5 rf, short 1 C, profit=$10,000 |
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Financial Management For Farmers And Rural Managers
Authors: Martyn Warren
4th Edition
0632048719, 9780632048717
