Question: Below you are given the expected return and standard deviations for Fund S and Fund B, as well as their correlation and the risk-free T-bill

Below you are given the expected return and standard deviations for Fund S and Fund B, as well as their correlation and the risk-free T-bill rate. a. Calculate the alpha of Portfolio A and Portfolio B. Identify if each portfolio is undervalued or overvalued. (4 pts) b. Create a new portfolio with zero beta using Portfolio A and Portfolio B. What is the expected return on this new portfolio? How does its return compare to the risk-free rate? Can you spot an arbitrage opportunity? (4 pts)

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