1. The following macroeconomic projected return models

= inflation and GDP = GDP growth

RBAH=9.2+0.2F+ 0.8FGDP+

RFIVN=11.6-0.6F+ 1.8 FGDP+

RSP500=8.8-1.2 F+ 1.6 FGDP+

1. Expected inflation is 2.3% and actual inflation may be greater by 0.4%, calculate the impact on the S&P500 projected return ( How would the projected return change)
2. Create a portfolio invested in Boaz Allan (BAH) and Five9 (FIVN) with the same exposure to GDP as the S&P500.
3. Create a portfolio invested in Boaz Allan (BAH) and Five9 (FIVN) to diversify away exposure to inflation.

2. Given the following information

	E(R )	S
BAH	8%	10%
FIVN	14%	16%
SSNC	11%	11.78%

Corr (Bah,FIVN) = 0.4

Does an arbitrage opportunity exist?

This is all the information given for the question.