Well-diversified portfolios and the risk-free rate

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Reference no: EM1310106

Assume that both X and Y are well-diversified portfolios and the risk-free rate is 8%. Portfolio X has an expected return of 14% and a beta of 1.00. Portfolio Y has an expected return of 9.5% and a beta of 0.25. In this situation, you would conclude that portfolios X and Y __________.

A) are in equilibrium

B) offer an arbitrage opportunity

C) are both underpriced

D) are both fairly priced

Reference no: EM1310106

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