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pls show the steps Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $68,600 or $161,400, with equal probabilities
pls show the steps
Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $68,600 or $161,400, with equal probabilities of 0.5 . The alternative riskless investment in T-bills pays 3.5%. Required: (a) If you require a risk premium of 9%, how much will you be willing to pay for the portfolio? (Round your answer to the nearest dollar amount. Omit the " $ " sign in your response.) (b)Suppose the portfolio can be purchased for the amount you found in (a). What will the expected rate of return on the portfolio be? (Round your answer to 2 decimal places. Omit the "\%" sign in your response.) Rate of return % (c) Now suppose you require a risk premium of 13%. What is the price you will be willing to pay now? (Round your answer to the nearest dollar amount. Omit the "\$" sign in your response.) Step by Step Solution
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