where did they get the 67% and or 33%

Exploiting arbitrage opportunity #2 The following information is available E(R) S Step 1: Equate risks DIS 12% 12% Step 2: Compare returns PANW 14% 16% 1. Combine Portfolio DIS and PANW (why?) Calculate S CR 12.1% 11.25% Corr (DIS,PANW)=0.2 S2 (port) = (W,25,2) + (W.2562) + 2 W, W. S. Srab S2 (port) = (W2122) + (1 -W,)2 162 +2 W, (1-W)12* 16*r ab E(R)-0.67*12+0.33*14-12.66% E(R)-0.33*12+0.67*14- 13.34% S2 (port) = ( W 2144) + (1 -W,)2256 + 2 W. (1-W.) 192*0.2 13.34% > 12.1% Mispricing exists S2 (port) = 323W,2 -435 W, + 256= 11.252 Long Portfolio, short CR S2 (port) = 323W,2-435 W, +129.4 Arbitrage profit = 1.34% W=67% or 33%