Why is the answer (d)? How do you construct arbitrage portfolio?And how do you work it out ?

12. Consider the following two-factor model for a well-diversied portfolio: F13 = up + pJ'l + 163312-1132: where ME] = ID and 0(13L} = 1 for R: = 1,2, and Coo[13'1,'2] = 0. Given the following information, how can one construct an arbitrage portfolio (assume the no- tional amount is $1M)? Portfolio e 1 egg long] 0%) A l 0 10 B t] 1 20 C i] 0 5 D 2 1 45 (a). Short-sell $1M of C and invest $1M in D. (b). Short-sell $0.5M of A and $0.5M of B and invest $1M in D. (c). Short-sell $1M of A and $0.5M of B and invest $1M in D. (d). None of the above