The table shows the average returns and betas for the five ETFs, S&P 500, and Treasury.                           VONF      IJT            PDP        FTA         FNY       S&P 500   Treasury Annualize mean  0.07148   0.11941   0.09613   0.07483   0.10233    0.09637      0.02541 Beta                     1.01106   1.11377   1.01507  1.02652    1.09928     1.00000      0.00000 Create a SML with the S&P 500 index's and the Treasury's average returns and betas. Determine whether the ETFs have return and beta combinations above or below the line you generated. Explain the arbitrage strategy you would form with one of the ETFs, index, or Treasury.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The table shows the average returns and betas for the five ETFs, S&P 500, and Treasury.

                          VONF      IJT            PDP        FTA         FNY       S&P 500   Treasury
Annualize mean  0.07148   0.11941   0.09613   0.07483   0.10233    0.09637      0.02541
Beta                     1.01106   1.11377   1.01507  1.02652    1.09928     1.00000      0.00000

  • Create a SML with the S&P 500 index's and the Treasury's average returns and betas.
  • Determine whether the ETFs have return and beta combinations above or below the line you generated. Explain the arbitrage strategy you would form with one of the ETFs, index, or Treasury.

 

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