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Today, Bell stock is trading at $52 per share, which is expected to rise to $55 per share by the end of a year from

  1. Today, Bell stock is trading at $52 per share, which is expected to rise to $55 per share by the end of a year from today. The dividend per share to be paid on the stock at the year-end is $1.00. The stocks beta is 0.8, the expected market return is 14%, and the risk-free interest rate is 4%. Is there an arbitrage opportunity?

  1. Yes
  2. No

  1. You are holding an all-equity financed portfolio valued at $21,000. The portfolios beta is 0.9. How can your portfolio be levered to have a beta of 1.2.?

  1. By a $10,000 increase in current investment in the portfolio
  2. By borrowing $7,000 to increase the current investment in the portfolio
  3. By borrowing $4,200 to increase the current investment in the portfolio
  4. By investing $10,000 in T-bills in addition to the current investment in the portfolio
  5. None of the above.

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