- 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

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**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

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**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 |