Portfolio A has a beta of 0.2 and an expected return of 14%. Portfolio B has a beta of 0.5 and an expected return of 16%. The risk-free rate of return is 10%. If you manage a long-short equity fund and want to take advantage of an arbitrage opportunity, you should take a short position in portfolio __________ and a long position in portfolio __________.

Multiple Choice

• A; A

• A; B

• B; A

• B; B