Show that there is an arbitrage by taking the following steps:. 1. Construct portfolio G through a combination of Portfolio A and Portfolio F. Set the portfolio weights so that the portfolio G has the same beta of portfolio E.
2. Consider a long short portfolio that longs Portfolio G and shorts Portfolio F. Report the return, rG-rF, for this long short portfolio in the answer box. Express your answer in percentage terms, rounded to the nearest tenth of a percent.

You are in the market for a new refrigerator for your company’s lounge, and you have narrowed the search down to two models. the energy efficient model sells for $700 and will save you $45 at the end of each of the next five years in electricity costs. the standard model has features similar to the energy efficient model but provides no future saving in electricity costs. it is priced at only $500. assuming your opportunity cost of funds is 6 percent, which refrigerator should you purchase