Question: You are advising a client to construct a portfolio worth 20 million. Youre advising your client to consider combining three index funds with a risk-free

You are advising a client to construct a portfolio worth 20 million. Youre advising your client to consider combining three index funds with a risk-free asset. The data below presents annualised returns for these index funds in different economic scenarios. However, annualized returns are estimated from index funds given daily price data. Nonetheless, the associated probabilities are your estimates reflecting market-wide perceptions.

State	Probability	HSBC FTSE 250	Black rock Growth	Barclays FTSE 100
Boom	0.15	0.26	0.40	(0.38)
Good	0.45	0.10	0.18	0.15
Poor	0.35	0.02	(0.19)	(0.03)
Bust	0.05	(0.08)	(0.32)	(0.06)
weights		0.35	0.30	0.35

If the T-bills rate is 2.5%, calculate the risk premium investors demand for buying one unit of risk.

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