Question: Risk & Return: Q=1.25; rf=2%; and RM=12%. Cash Flows: g=5% and is constant; the last dividend paid was D0=$2.00 1. Combine M and F so

Risk & Return: Q=1.25; rf=2%; and RM=12%. Cash Flows: g=5% and is constant; the last dividend paid was D0=$2.00 1. Combine M and F so that its beta is identical to Q. Show the level of return. Call this combination portfolio P 2. Find the level of arbitrage return from buying P and selling Q 3. Is there a relationship between Jensens Alpha and the arbitrage level of return? Explain. Note: Responding only yes or no is insufficient

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