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SVETLANKA909090 [29]
3 years ago
9

Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $70,000 or $200,000 with equal p

robabilities of .5. The alternative risk-free investment in T-bills pays 6% per year.
a. If you require a risk premium of 8%, how much will you be willing to pay for the portfolio? (Round your answer to the nearest whole dollar amount. Omit the "$" sign in your response.)

Price________$

b.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? (Round your answer to the nearest whole number. Omit the "%" sign in your response.)

Rate of return______%

c.Now suppose that you require a risk premium of 12%. What is the price that you will be willing to pay? (Round your answer to the nearest whole dollar amount. Omit the "$" sign in your response.)

Price_______$
Business
1 answer:
xenn [34]3 years ago
4 0

Answer:

A) 964,286

B) 14

C) 750,000

Explanation:

The portfolios expected return = (0.5 x $70,000) + (0.5 x $200,000) = $35,000 + $100,000 = $135,000

If the risk free investment yields 6% per year, and you require a risk premium of 8%, then the total interest rate that the portfolio yields must be 6% + 8% = 14%

you will be willing to pay: $135,000 / 14% = $964,286 for the portfolio

if the risk premium increase by 4%, then the price of the portfolio will decrease to: $135,000 / 18% = $750,000

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Explain the role of finance in business​
nadezda [96]

Answer:

Definition 1:

FINANCE is the function in a business responsible for acquiring funds for the firm, managing funds within the firm, and planning for the expenditure of funds on various assets. ... FINANCIAL MANAGEMENT is the job of managing a firm's resources so it can meet its goals and objectives.

Definition 2:

Finance is critical in just about every business decision, from planning and budgeting and cash flow management to the capital structure and how you control risks and costs.

(please note that this was found by doing research.)

Hope this helps!

Can I have brainliest, please? I'm trying to earn 50 Brainliest.

6 0
3 years ago
Read 2 more answers
Anthony Finley wishes to become a millionaire. His money market fund has a balance of $287,270 and has a guaranteed interest rat
mrs_skeptik [129]

Answer:

15 years

Explanation:

The target accumulated future amount is the future value of the initial investment(present value), hence, using the future value formula provided below we can determine the investment time horizon in years required to accumulate the target amount:

FV=PV*(1+r)^n

FV=$1,200,000

PV=$287,270

r=10%

n=investment period in years=unknown

$1,200,000=$287,270*(1+10%)^n

$1,200,000/$287,270=(1+10%)^n

$1,200,000/$287,270=(1.10)^n

take log of both sides

ln($1,200,000/$287,270)=n ln(1.10)

n=ln($1,200,000/$287,270)/ln(1.10)

n=15.00years

4 0
2 years ago
Beth is a retired teacher who lives in dallas and does some consulting work for extra cash. at a wage of $40 per hour, she is wi
Ipatiy [6.2K]
Price Elasticity of Supply. The price elasticity of supply is calculated as the percentage change in quantity divided by the percentage change in price.
 Using the Midpoint Method
 PES = ((Q2-Q1) / ((Q2 + Q1) / 2)) / ((P2-P1) / ((P2 + P1) / 2))
 PES = (((10) - (7)) / (((10) + (7)) / 2)) / (((50) - (40)) / (((50) + (40)) / 2))
 PES = 1.59
 the elasticity of beth's labor supply between the wages of $ 40 and $ 50 per hour is approximately 1.59
 In this case, to 1% rise in price causes an increase in quantity supplied of 1.59%
 answer:
 the elasticity of beth's labor supply between the wages of $ 40 and $ 50 per hour is approximately 1.59
 In this case, to 1% rise in price causes an increase in quantity supplied of 1.59%
4 0
3 years ago
What types of crime you experience most frequently?​
Ghella [55]

Answer:

well if you live in a safe country

Explanation:

u wont experience any crime

6 0
3 years ago
Read 2 more answers
Identify whether each of the following transactions will take place in the factor marketLOADING... or in the product marketLOADI
Debora [2.8K]

Answer:

a. George buys a Tesla Model S.

Product market.  Demanded by household  and supplied by the firm

b. Tesla increases employment at its Fremont plant.

Factor market.  Demanded by firm  and supplied by the household

c. George works 20 hours per week at McDonald’s.

Factor market.  Demanded by firm  and supplied by the household

d. George sells the land he owns to McDonald’s so that it can build a new restaurant.

Factor market.  Demanded by firm  and supplied by the household

Explanation:

a. George buys a Tesla Model S.

The transaction took place in the product market.

The good was demanded by household

The good was supplied by the firm

b. Tesla increases employment at its Fremont plant.

The transaction took place in the factor market.

The labor was demanded by firm

The labor was supplied by the household

c. George works 20 hours per week at McDonald’s.

The transaction took place in the factor market.

The labor was demanded by firm

The labor was supplied by the household

d. George sells the land he owns to McDonald’s so that it can build a new restaurant.

The transaction took place in the factor market.

The factor of production was demanded by firm

The factor of production was supplied by the household

6 0
3 years ago
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