- CFA Exams
- CFA Level I Exam
- Study Session 18. Portfolio Management (1)
- Reading 52. Portfolio Risk and Return: Part I
- Subject 3. Historical Return and Risk
CFA Practice Question
An investor can choose to invest in T-bills paying 5% or a risky portfolio with an end-of-year expected 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. $108,000
B. $120,000
C. $145,000
Explanation: 132,000/(1+5%+5%) = 120,000
User Contributed Comments 3
| User | Comment |
|---|---|
| ksnider | you can calculate it with a PV on the calculator |
| dipu617 | FV = 132000 I/Y = 10% (risk premium + risk-free rate) N = 1 [CPT] PV = 120,000 |
| lastduke | ...just divide 132/1.1 |