Question: Consider the single factor APT. Portfolio A has a beta of 1.7 and an expected return of 22.5%. Portfolio B has a beta of 0.3

Consider the single factor APT. Portfolio A has a beta of 1.7 and an expected return of 22.5%. Portfolio B has a beta of 0.3 and an expected return of 5.5%. The risk-free rate of return is 2.5%. If you wanted to take advantage of an arbitrage opportunity you should take a short position in portfolio and a long position in portfolio B: B B; A O AB OAA

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