Portfolio a Has a Beta of 0

Portfolio A has a beta of 0.2 and an expected return of 14%.Portfolio B has a beta of 0.5 and an expected return of 16%.The risk-free rate of return is 10%.If you manage a long/short equity fund and wanted to take advantage of an arbitrage opportunity,you should take a short position in portfolio ______ and a long position in portfolio __________.

A) A; A
B) A; B
C) B; A
D) B; B

Correct Answer:

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