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Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $55,000 or $300,000 with equal probabilities of 0.5. The
Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $55,000 or $300,000 with equal probabilities of 0.5. The alternative risk-free investment in T-bills pays 4% per year. Required: a. If you require a risk premium of 5%, how much will you be willing to pay for the portfolio? b. Suppose that the portfolio can be purchased for the amount you found in (a). What will be the expected rate of return on the portfolio? c. Now suppose that you require a risk premium of 10%. What price are you willing to pay? Complete this question by entering your answers in the tabs below. Required A Required B Required C es If you require a risk premium of 8%, how much will you be willing to pay for the portfolio? Note: Do not round your intermediate calculations. Round your answer to the nearest whole dollar amount. Price
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