If you wanted to take advantage of a risk-free arbitrage opportunity, you should take a short position in ___ and a long position in an equally weighted portfolio of _.

Full question is "Consider the single factor APT. Portfolio A has a beta of 1.6 and an expected return of 20%. Portfolio B has a beta of .7 and an expected return of 16%. The risk-free rate of return is 9%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio __________ and a long position in portfolio _________."

CAPM Return = Rf+beta * Risk premium

A return = 0.09 + 1.6*Risk premium

0.2 = 0.09 + 1.6*Risk premium

1.6*Risk premium = 0.02 - 0.09

1.6*Risk premium = 0.11

Risk premium = 0.11/1.6

Risk premium = 0.06875

Risk premium = 6.88%

B return = 0.09 + 0.7*Risk premium

0.16 = 0.09 + 0.7*Risk premium

0.7*Risk premium = 0.16 - 0.09

0.7*Risk premium = 0.07

Risk premium = 0.07/0.7

Risk premium = 0.1

Risk premium = 10%

Hence, we should take a short position in A and a long position in an equally weighted portfolio of B.

If you wanted to take advantage of a risk-free arbitrage opportunity, you should take a short position in _________ and a long position in an equally weighted portfolio of _______.

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If you wanted to take advantage of a risk-free arbitrage opportunity, you should take a short position in ___ and a long position in an equally weighted portfolio of _.