Consider a one factor economy. priced. Calculate the risk free rate and the expected return...
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Consider a one factor economy. priced. Calculate the risk free rate and the expected return of the factor portfolio. (12 marks) (2) There is a third well-diversified portfolio C. Its beta is 0.9. It has a forecasted return of 10%. Is there any arbitrage opportunity? If the answer is yes, how to construct the arbitrage portfolio? (12 marks)
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