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There are two welldiversified portfolios in the economy, portfolio A and portfolio B. Portfolio A has beta of 1.5 and expected return of 14%, while
There are two welldiversified portfolios in the economy, portfolio A and portfolio B. Portfolio A has beta of 1.5 and expected return of 14%, while portfolio B has beta 0.9 and expected return of 11.4%. If the expected return on the market is 12% and riskfree rate is 6%, is there an arbitrage opportunity? If so, show your arbitrage strategy.
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