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3 a b c d 3. Considera risky portfolio The end of year cash flow derived from the portfolio will be either $50.000 $150,000, with

3 a b c d
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3. Considera risky portfolio The end of year cash flow derived from the portfolio will be either $50.000 $150,000, with equal probabilities of Os. The sternative riskless investment in Tbill pays If you require a risk premium of 10%, how much will you be willing to pay for the portfolio Answe b. Suppose the portfolio can be purchased for the amount you found in (a). What will the expected rate of return on the portfolio be? Answer: c. Now suppose you require a risk premium of 128. What is the price you will be willing to pay now! Answer: d. Comparing your answers to (a) and (c), what do you conclude about the relationship between the required risk premium on a portfolio and the price at which the portfolio will sell? Answer: 3. Considera risky portfolio The end of year cash flow derived from the portfolio will be either $50.000 $150,000, with equal probabilities of Os. The sternative riskless investment in Tbill pays If you require a risk premium of 10%, how much will you be willing to pay for the portfolio Answe b. Suppose the portfolio can be purchased for the amount you found in (a). What will the expected rate of return on the portfolio be? Answer: c. Now suppose you require a risk premium of 128. What is the price you will be willing to pay now! Answer: d. Comparing your answers to (a) and (c), what do you conclude about the relationship between the required risk premium on a portfolio and the price at which the portfolio will sell

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