Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $40,000 or $135,000, with equal probabilities of 0.5. The alternative riskless investment in T-bills pays 4%.
a. If you require a risk premium of 10%, how much will you be willing to pay for the portfolio?
b. Suppose the portfolio can be purchased for the amount you found in (a). What will the expected rate of return on the portfolio be?
c. Now suppose you require a risk premium of 15%. What is the price you will be willing to pay now?

Rate of return, standard deviation, coefficient of variation personal finance problem mike is searching for a stock to include in his current stock portfolio. he is interested in hi-tech inc.; he has been impressed with the company's computer products and believes hi-tech is an innovative market player. however, mike realizes that any time you consider a technology stock, risk is a major concern. the rule he follows is to include only securities with a coefficient of variation of returns below 1.07. mike has obtained the following price information for the period 2015 through 2018:hi-tech stock, being growth-oriented, did not pay any dividends during these 4 years. a. calculate the rate of return for each year, 2015 through 2018, for hi-tech stock. b. assume that each year's return is equally probable and calculate the average return over this time period. c. calculate the standard deviation of returns over the past 4 years. (hint: treat this data as a sample.) d. based on b and c determine the coefficient of variation of returns for the security. e. given the calculation in d what should be mike's decision regarding the inclusion of hi-tech stock in his portfolio?