Question: Consider the following data for a one-factor economy. All portfolios are well diversified. Suppose that another portfolio, portfolio E, is well diversified with a beta

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

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 arbitragestrategy?

Portfolid Elr) Beta 12% 5% 1.2 0.0

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