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4. Mrs. Tatiana is willing to invest $75,000 in a risky portfolio. The cash flows derived from this portfolio after 2 years will be either
4. Mrs. Tatiana is willing to invest $75,000 in a risky portfolio. The cash flows derived from this portfolio after 2 years will be either $60,000 or $105,000 with probabilities of 40% and 60% respectively. Assume that the risk-free rate is 4%. What is the expected risk-premium of Mrs. Tatiana? *
a. 7.7%
b. 3.7%
c. 11.7%
d. 10.7%
e. None of the above
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