Question: Suppose there are two assets under the single-factor model, the model estimations are shown in the following table b e a 0.10 10.08 2 Asset1

Suppose there are two assets under the single-factor model, the model

Suppose there are two assets under the single-factor model, the model estimations are shown in the following table b e a 0.10 10.08 2 Asset1 Asset 2 0 0 It is also known that the risk free rate is 4%. Identify whether there is any arbitrage opportunities. If yes, what is the arbitrage strategy. If no, explain why. [4 marks]

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