Suppose that another portfolio portfolio e is well

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Consider the following data for a one-factor economy. All portfolios are well diversified.

portfolio

E(r)

Beta

A

12%

1.2

F

6%

0.0

Suppose that another portfolio, portfolio E, is well diversified with a beta of .6 and expected return of 8%. Would an arbitrage opportunity exist? If so, what would be the arbitrage strategy?

Reference no: EM13573410

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