Question 4 Expected return on security (%) Security market line (SML) M RE 0 .8 1 Beta of security Select what is TRUE about above graph. O You can create a portfolio with beta of 0.8 by holding 80% in the market portfolio and 20% in risk-free asset, which gives a lower expected return than the expected return of Portfolio S. You can create a portfolio with beta of 0.8 by holding 80% in the market portfolio and 20% in risk-free asset, which gives a lower expected return than the expected return of Portfolio T. O Market portfolio should be plotted below the security market line (SML). Arbitrageurs will keep selling Portfolio T until its expected return goes up and converges to the expected return implied by SML. Arbitrageurs will keep buying Portfolio 5 until its expected return goes down and converges to the expected return implied by SML