Security A has a beta of 1.0 and an expected return of 12%. Security B has a beta of 0.75 and an expected return of 11%. The risk-free rate is 6%. a. Suppose you combine Security A and risk free asset to form a portfolio called C, which has the same beta as Security B. What is the weight on security A in portfolio C? b. Show that an arbitrage exists. Show what to buy and what to sell.

You are thinking of making your mansion more energy efficient by replacing some of the light bulbs with compact fluorescent bulbs, and insulating part or all of your exterior walls. each compact fluorescent light bulb costs $4 and saves you an average of $2 per year in energy costs, and each square foot of wall insulation costs $1 and saves you an average of $0.20 per year in energy costs.† your mansion has 150 light fittings and 3000 sq ft of uninsulated exterior wall. to impress your friends, you would like to spend as much as possible, but save no more than $750 per year in energy costs (you are proud of your large utility bills). how many compact fluorescent light bulbs and how many square feet of insulation should you purchase? how much will you save in energy costs per year? (if an answer does not exist, enter dne.)