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

5. After 1 year, a risky portfolio would have a 40% chance of tripling your investment and a 60% chance of losing 75% of your money. What is your expected return on this investment? *

a. 165%

b. 35%

c. 65%

d. 16.5%

e. None of the above

6. The duration of ABC bond is 6 years. The current market interest rates are 7%. You are expecting a slight increase in interest rates by 0.25%. What is the percentage change of ABCs bond price? *

a. +2.51%

b. -2.51%

c. -1.4%

d. +1.4%

e. None of the above