Security A has a beta of 1.0 and an expected return of 12%. Security B...
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Security A has a beta of 1.0 and an expected return of 12%. Security B has a beta of 0.75 and an expected return of 11%. The risk-free rate is 6%. a. Suppose you combine Security A and risk free asset to form a portfolio called C, which has the same beta as Security B. What is the weight on security A in portfolio C? $| b. Show that an arbitrage exists. Show what to buy and what to sell
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