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

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Definitions:

Heart Disease

A broad category of illnesses that affect the heart's structure and function.

Weight Gain

An increase in body weight over time.

Sleep Deprivation

Sleep deprivation occurs when an individual gets less than the needed amount of sleep, leading to physical, emotional, and cognitive impairments.

Verbal Learning

The process by which individuals acquire, retain, and recall information and concepts through words, either spoken or written.