Consider a single factor APT. Both Asset A and Asset B are well-diversified. Portfolio A has a beta of 0.5 and an expected return of 10%. Portfolio B has a beta of 1.5 and an expected return of 18.0%. The risk-free rate of return is 5%.

1) Construct a zero-beta portfolio, consisting of assets A and B only. The portfolio weights of assets A and B sum to 1. What are the portfolio weights for A and B, respectively? A. 1.5, -0.5 B. -0.5; 1.5 C. -1.5, 0.5 D. -1.5; -0.5

2) If you $2000 of Portfolio B, of Portfolio A, and, of risk-free bond, your arbitrage profit is: A. There is no arbitrage; $0. B. long; short $8000; long $4000; $15 C. short; long $6000; short $4000; $40 D. long; long $8000; short$4000; $40