Suppose the single-factor APT is the correct model. However, the way the APT becomes the correct model is by investors exploiting arbitrage opportunities. Suppose well-diversified portfoli A has a beta value on the factor F of Ba = 2, and an expected return of E(ra) = 10%. Asset B has a beta of BB = 1.2 and expected return E(TB) = 6.5%. Suppose return = = = = to risk-free asset is 1%. Is there arbitrage here? Part B: Multi-Factor Models Ok, I am going to walk you through the algebra on this. I highly suggest you don't simply Suppose the single-factor APT is the correct model. However, the way the APT becomes the correct model is by investors exploiting arbitrage opportunities. Suppose well-diversified portfoli A has a beta value on the factor F of Ba = 2, and an expected return of E(ra) = 10%. Asset B has a beta of BB = 1.2 and expected return E(TB) = 6.5%. Suppose return = = = = to risk-free asset is 1%. Is there arbitrage here? Part B: Multi-Factor Models Ok, I am going to walk you through the algebra on this. I highly suggest you don't simply