Consider the Following Two Investment Alternatives

question 32

Multiple Choice

Consider the following two investment alternatives. First, a risky portfolio that pays 15% rate of return with a probability of 40% or 5% with a probability of 60%. Second, a Treasury bond that pays 6%. The risk premium on the risky investment is ________.

• A)1%
• B)3%
• C)6%
• D)9%

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