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You are an investor and notice a diversified portfolio, A from the table below. Suppose you use a multifactor APT model and expect A to
You are an investor and notice a diversified portfolio, A from the table below. Suppose you use a multifactor APT model and expect A to generate a return of 8.75% during the next year. Using a risk-free rate of 4%, a market risk premium of 6%, calculate the beta and CAPM then determine how much arbitrage profit you could generate on a $100,000 position. \begin{tabular}{l} $505.47 \\ \hline$505.47 \\ \hline$508.20 \\ \hline$508.20 \\ \hline$0 \end{tabular}
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