PM - Using multifactor Model EOC question
Could someone please help me understand the EOC question number 9 in Reading 44, I thought the answer was B but as per the curriculum the answer is C and I am unable to comprehend this, help me please?
The arbitrage opportunity identified by Zapata can be exploited with:
A Strategy 1: Buy $50,000 Fund A and $50,000 Fund B; sell short $100,000 Fund C.
B Strategy 2: Buy $60,000 Fund A and $40,000 Fund B; sell short $100,000 Fund C.
C Strategy 3: Sell short $60,000 of Fund A and $40,000 of Fund B; buy $100,000 Fund C
-> to my understanding, Fund A and B will have 60 % and 40 % weights which gives this portfolio return of 2.8% ( buy A and B)
->and Fund C expected return is 3% ( sell Fund C).
Am I missing something here?
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