Shares of Zoom Video Communications (ZOOM) and Norwegian Cruise Line Holdings (NCLH) are two risky securities. The expected return of ZOOM is 6%, and its standard deviation is 7%. The expected return of NCLH is 4%, and its standard deviation is 5%. The returns on ZOOM and NCLH are perfectly negatively correlated (ZOOM,NCLH = 1).

(a) What fractions of an investor's wealth should be held in ZOOM and NCLH in order to produce a zero-risk portfolio?

(b) What is the expected return on the zero-risk portfolio?

(c) Suppose that the risk-free T-bill rate is equal to 3%. How would you set up an arbitrage trade?