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7. You have invested $4,000 in stock A, $4,000 in stock B, and $2,000 in stock C. The risk free rate of return is 4.03%

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7. You have invested $4,000 in stock A, $4,000 in stock B, and $2,000 in stock C. The risk free rate of return is 4.03% (expected return on T-Bills). Given the following information, calculate the return on this portfolio and then calculate the portfolio risk premium. Rate of Return State of Economy Probability Stock A (%) Stock B (%) Stock C (%) Boom 5% 7 15 28 Normal 80% 9 12 17 Recession 15% 10 2 -35

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