Portfolio a Has a Beta of 1

question 1

Multiple Choice

Portfolio A has a beta of 1.3 and an expected return of 21%. Portfolio B has a beta of .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:

Ethnic Differences

Variations in behaviors, practices, and health outcomes among individuals from different ethnic or racial backgrounds.

Low Education Level

Refers to a minimal amount of formal schooling or academic achievement, typically less than high school completion.

Mother's Personality

The combination of emotional, attitudinal, and behavioral response patterns of a mother that can influence her parenting style and her children's development.

Life Expectancy

The average period that a person may expect to live.