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Problem 2 Consider the following data for a one-factor economy. Both portfolios are well diver- sified. Portfolio E(r) Betace 14% 10% 2 1 1. Find

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Problem 2 Consider the following data for a one-factor economy. Both portfolios are well diver- sified. Portfolio E(r) Betace 14% 10% 2 1 1. Find the risk-free rate in this economy. 2.-Suppose that another portfolio, portfolio C, is well diversified with a beta of 0.2 and expected return of 10%. Would an arbitrage opportunity exists? If so what would be the arbitrage strategy

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