Question: Question 9: Consider the single factor APT. Portfolio A has a beta of 1.1 and an expected return of 22%. Portfolio B has a beta

Question 9:

Consider the single factor APT. Portfolio A has a beta of 1.1 and an expected return of 22%. Portfolio B has a beta of 0.6 and an expected return of 18%. The risk-free rate of return is 7%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in ____________ and a long position in ______________.

Portfolio A; Portfolio B
Portfolio B; Portfolio A
Portfolio A; a portfolio consisting of Portfolio A and the risk-free asset
Portfolio B; a portfolio consisting of Portfolio B and the risk-free asset

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