You are provided with the following information

Nominal return on risk-free asset = 5%

Expected return for asset i = 14%

Expected return on the market portfolio = 12%

a. (5 points)

Calculate the risk premium for asset i

b. (5 points)

Calculate the risk premium for the market portfolio

Assume that you hold a two stock portfolio. You are provided with the following information on your holdings

Stock Shares Price(t) Price(t+1)

1 15 40 46

2 25 20 17

a. (2 points)

Calculate the HPR for stock 1

b. (2 points)

Calculate the HPR for stock 2

c. (3 points)

Calculate the market weights for stock 1 and 2 based on period t values

d. (3 points)

Calculate the HPY for the portfolio