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Portfolio a Has a Beta of 1

Question 48

Multiple Choice

Portfolio A has a beta of 1.3 and an expected return of 21%.Portfolio B has a beta of 0.7 and an expected return of 17%.The risk-free rate of return is 9%.If a hedge fund manager wants to take advantage of an arbitrage opportunity,she 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

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