a.) Consider a one-factor economy. Portfolio A has a beta of 1.0 on the factor, and portfolio B has a beta of 2.0 on the factor. The expected returns on portfolios A and B are 11% and 17%, respectively. Assume that the risk-free rate is 6%, and that arbitrage opportunities exist. Suppose you invested $100,000 in the risk-free asset, $100,000 in portfolio B, and sold short $200,000 of portfolio A. What would be your expected profit from this strategy?

b.) Consider the single factor APT. Portfolios A and B have expected returns of 14% and 18%, respectively. The risk-free rate of return is 7%. If Portfolio A has a beta of 0.7 and arbitrage opportunities are ruled out, how much is the beta that portfolio B must have?