Question

Consider the following two investment alternatives. First, a risky portfolio that pays a 12 percent rate of return with a probability of 50% or a 4 percent return with a probability of 50%, and second, a T-bill that pays 3 percent. The risk premium on the risky investment is

Answer 1

The risk premium on the risky investment is 5%

What is investment?

The dedication of an asset to achieve an increase in value over time is referred to as investment. Investment necessitates the sacrifice of a current asset, such as time, money, or effort. The goal of investing in finance is to generate a return on the invested asset.

Income investing is an investment strategy that focuses on constructing an investment portfolio that is specifically designed to generate regular income. The income investing strategy's sole goal is to generate a consistent stream of income.

The type of investor you are and how you should make investments are determined by your investing personality. Your investing personality is essentially your financial risk profile, which takes into account a variety of factors such as age, financial history, circumstances, and investment objectives.

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