Consider a risky portfolio. The end - of - year cash flow derived from the portfolio will
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Question:
Consider a risky portfolio. The endofyear cash flow derived from the portfolio will be either $ or $ with equal probabilities of The alternative riskfree investment in Tbills pays per year.
Required:
If you require a risk premium of how much will you be willing to pay for the portfolio?
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?
Now suppose that you require a risk premium of What price are you willing to pay?
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