An Investor Can Choose to Invest in T-Bills Paying 5

question 43

Multiple Choice

An investor can choose to invest in T-bills paying 5% or a risky portfolio with end-of-year cash flow of $132,000.If the investor requires a risk premium of 5%,what would she be willing to pay for the risky portfolio?

• A) $100,000
• B) $108,000
• C) $120,000
• D) $145,000
• E) $147,000

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Definitions:

Average Score

The sum of all the numerical values in a set divided by the number of values in the set, representing the central tendency.

Variable

A component, trait, or aspect that is subject to alteration or modification.

Normally Distributed

A statistical term describing data that forms a bell-shaped curve when plotted, indicating that most values cluster around a central mean and tails off symmetrically towards the extremes.

Standard Deviation

A statistic that measures the dispersion or variability of a dataset relative to its mean, indicating how spread out the data points are.