Portfolio a Has a Beta of 1

question 48

Multiple Choice

Portfolio A has a beta of 1.3 and an expected return of 21%.Portfolio B has a beta of 0.7 and an expected return of 17%.The risk-free rate of return is 9%.If a hedge fund manager wants to take advantage of an arbitrage opportunity,she should take a short position in portfolio __________ and a long position in portfolio __________.

• A) A; A
• B) A; B
• C) B; A
• D) B; B

---

Definitions:

Fuzzy Positions

Vague or unclear stances on issues, often intentionally, to avoid alienating potential supporters.

Expert Audiences

Specific groups of individuals with advanced knowledge or skills in a particular domain or field.

Specific Recommendation

A detailed and explicit suggestion aimed at resolving a problem or improving a situation.

Array of Perspectives

A broad range of viewpoints or opinions on a particular issue, highlighting the diversity of thought.