The table shows the average returns and betas for the five ETFs, S&P 500, and Treasury.

                                  VONF           IJT          PDP       FTA           FNY       S&P 500 Treasury
Annualize mean   0.07148    0.11941  0.09613  0.07483  0.10233  0.09637    0.02541
Beta                        1.01106    1.11377   1.01507   1.02652    1.09928 1.00000    0.00000

• Create a SML with the S&P 500 index's and the Treasury's average returns and betas.
• Determine whether the ETFs have return and beta combinations above or below the line you generated. Explain the arbitrage strategy you would form with one of the ETFs, index, or Treasury.

Answer rating: 100% (QA)

SML equation Rf Beta x MR Rf SML equation using SP 500 index and the Treasury returns is as follows ... View the full answer