You are considering whether to invest in a risky portfolio (P), whose end-of-year cash flow is expected to be $175,000, $110,000, or $85,000 with probabilities 0.15, 0.50, and 0.35, respectively. Your alternative option is to invest in a one-year risk-free Treasury bill (F) offering a rate of return of 5% (rf).

2. (10 points) If you require a risk premium of 9%, how much will you pay for the risky investment?