I would like to propose two changes to the solution proposed in file R10.P1.T1.Bodie:
- The variances for the return are given in an arbitrary and unspecified dimension (e.g. "881" where the unit would be percent-squared i.e. per-ten thousand or base points). It would be much more correct to divide the percentages by 100 to have no-dimension values in the calculation and provide the unit in the result (e.g. 8.81%)
- For question c, the solution claims there is no arbitrage opportunity, but as the problem provides the excess returns, there is no justification for subtracting the risk-free return a second time when calculating the Treynor, therefore there is an arbitrage opportunity by selling A and shorting C.
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