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Please explain and show all work. Question 1: An investor considering an opportunity that promises to provide 12% returns. They have obtained an estimate of
Please explain and show all work.
Question 1:
An investor considering an opportunity that promises to provide 12% returns. They have obtained an estimate of their risk free rate, which is 3%. What is the risk premium assessed for this opportunity?
What does the risk premium mean in this example?
If the investors [stock] market portfolio provides a return of 10%, would you assess that the opportunity is more or less risky than their present holdings?
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