Diversified portfolios and the risk free rate

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Assume that both X and Y are well diversified portfolios and the risk free rate is 4%.

Portfolio Expected Return Beta

A 7% .73

B 9% 1.00

In this situation, show how you could create an arbitrage profit. Supposeyou iniate this abitrage trade with $100,000, what would be your trade postions and profits. SHOW ALL WORK.

HOW MUCH WOULD YOU BUY, SELL, BORROW ?

Reference no: EM131875864

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