Question
Suppose there were two well diversified portfolios, X and Y. You know the following about the portfolios: Portfolio E(r) Beta X .13 1.2 Y .04
- Suppose there were two well diversified portfolios, X and Y. You know the following about the portfolios:
| Portfolio | E(r) | Beta |
| X | .13 | 1.2 |
| Y | .04 | 0 |
Suppose another portfolio, W, is available with a Beta of .9 and an expected return of .12. Is there an arbitrage opportunity available, and if so what is alpha on that arbitrage opportunity?
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PFIN
Authors: Randall Billingsley , Lawrence J. Gitman , Michael D. Joehnk
7th Edition
0357033612,0357033698
