Given the following three assets, determine whether an arbitrage opportunity exists according to the arbitrage pricing theory. If so, please calculate theexcess return of the arbitrage portfolio; if there is no arbitrage opportunity, please enter zero as your answer. (Assume the weight in B is standardized to 1 or-1 depending on the position)Answers must be entered with 2 decimal places and no percent signs, e.g. 6 as 6.00; 32.346 as 32.35.AssetE(r) (%)BetaWeightsA101.0B151.46C50.0The arbitrage excess return is%.

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Description: Given the following three assets, determine whether an arbitrage opportunity exists according to the arbitrage pricing theory. If so, please calculate theexcess return of the arbitrage portfolio; if there is no arbitrage opportunity, please enter ze

In the given assets, you first need to check the beta. Beta is the measure of systematic risk. For…

Answered: The arbitrage excess return is %.

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The arbitrage excess return is %.

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter25: Portfolio Theory And Asset Pricing Models

Section: Chapter Questions

Problem 4P

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