The amount which is paid for the portfolio is 8% risk premium is to be determined. Introduction: The present values of portfolio is defined as the contemporary values of the subsequent amount of money or called as stream of cash flow with defined rate of return .

Question

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Answer 1

Question

Chapter 6, Problem 4PS

A

Summary Introduction

To calculate:The amount which is paid for the portfolio is 8% risk premium is to be determined.

Introduction:The present values of portfolio is defined as the contemporary values of the subsequent amount of money or called as stream of cash flow with defined rate of return.

A

Expert Solution

Answer to Problem 4PS

The present values of the portfolio= $ 118,421

Explanation of Solution

The expected cash flow is determined by the summation of the product of the probability with the cash flow in two scenarios.

Cash flow = $ 70,000 with probability 0.5

Cash flow = $200,000 with probability 0.5

expected cash flow=(0.5×$70,000)+(0.5×200,000)

The assumed cash flow = $135,000

Mentioned risk premium = 8%

Mentioned risk-free rate = 6%

Mentioned rate of return = 14%

The present value of portfolio is determined by dividing assumed cash flow by stated rate of return.

present value=expected cash flowrate of return.................... Equation (1)

Put the given values in Equ (1)

present value=$135,0001.14=$118,421

The present value of the portfolio = $118,421

B

Summary Introduction

To calculate:The assumed rate of return of the portfolio is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with identified rate of return.

B

Expert Solution

Answer to Problem 4PS

The assumed rate of return = $135,000

Explanation of Solution

The assumed rate of the return is calculated by the following formula −

expected rate of the return[E(r)]=present value of the portfolio×[1+E(r)] …………Equation (2)

expected rate of the return[E(r)]=$118,421×[1+0.14]

The assumed rate of return = $135,000

C

Summary Introduction

To calculate:Theamount which is paid for the portfolio at 12% risk premium is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a stated rate of return.

C

Expert Solution

Answer to Problem 4PS

The present value of the portfolio = $114,407

Explanation of Solution

Given that −

Risk premium = 12%

Risk-free rate = 6%

Required rate of return=12%+6%=18%

The present value of portfolio is ascertained by dividing assumed cash flow by identified rate of return.

present value=expected cash flowrate of return.................... Equ (1)

Put the given values in Equ (1)

present value=$135,0001.18=$114,407

The present value of the portfolio = $114,407

D

Summary Introduction

To calculate:The relation between risk portfolio and the amount at which it sell is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a expected rate of return.

D

Expert Solution

Answer to Problem 4PS

The portfolio with higher risk will sell at lower price. The portfolio (a) will be selling at lower price.

Explanation of Solution

The current value of the portfolio (a) = $118,421

The current value of the portfolio (c) = $114,407

The portfolio with higher risk will be selling at lower price and providing extra discount from assumed price is a consequence of risk.

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3 years ago, you invested $9,200. In 3 years, you expect to have $14,167. If you expect to earn the same annual return after 3 years from today as the annual return implied from the past and expected values given in the problem, then in how many years from today do you expect to have $28,798?

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Answer 2

Question

Chapter 6, Problem 4PS

A

Summary Introduction

To calculate:The amount which is paid for the portfolio is 8% risk premium is to be determined.

Introduction:The present values of portfolio is defined as the contemporary values of the subsequent amount of money or called as stream of cash flow with defined rate of return.

A

Expert Solution

Answer to Problem 4PS

The present values of the portfolio= $ 118,421

Explanation of Solution

The expected cash flow is determined by the summation of the product of the probability with the cash flow in two scenarios.

Cash flow = $ 70,000 with probability 0.5

Cash flow = $200,000 with probability 0.5

expected cash flow=(0.5×$70,000)+(0.5×200,000)

The assumed cash flow = $135,000

Mentioned risk premium = 8%

Mentioned risk-free rate = 6%

Mentioned rate of return = 14%

The present value of portfolio is determined by dividing assumed cash flow by stated rate of return.

present value=expected cash flowrate of return.................... Equation (1)

Put the given values in Equ (1)

present value=$135,0001.14=$118,421

The present value of the portfolio = $118,421

B

Summary Introduction

To calculate:The assumed rate of return of the portfolio is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with identified rate of return.

B

Expert Solution

Answer to Problem 4PS

The assumed rate of return = $135,000

Explanation of Solution

The assumed rate of the return is calculated by the following formula −

expected rate of the return[E(r)]=present value of the portfolio×[1+E(r)] …………Equation (2)

expected rate of the return[E(r)]=$118,421×[1+0.14]

The assumed rate of return = $135,000

C

Summary Introduction

To calculate:Theamount which is paid for the portfolio at 12% risk premium is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a stated rate of return.

C

Expert Solution

Answer to Problem 4PS

The present value of the portfolio = $114,407

Explanation of Solution

Given that −

Risk premium = 12%

Risk-free rate = 6%

Required rate of return=12%+6%=18%

The present value of portfolio is ascertained by dividing assumed cash flow by identified rate of return.

present value=expected cash flowrate of return.................... Equ (1)

Put the given values in Equ (1)

present value=$135,0001.18=$114,407

The present value of the portfolio = $114,407

D

Summary Introduction

To calculate:The relation between risk portfolio and the amount at which it sell is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a expected rate of return.

D

Expert Solution

Answer to Problem 4PS

The portfolio with higher risk will sell at lower price. The portfolio (a) will be selling at lower price.

Explanation of Solution

The current value of the portfolio (a) = $118,421

The current value of the portfolio (c) = $114,407

The portfolio with higher risk will be selling at lower price and providing extra discount from assumed price is a consequence of risk.

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Answer 3

Question

Chapter 6, Problem 4PS

A

Summary Introduction

To calculate:The amount which is paid for the portfolio is 8% risk premium is to be determined.

Introduction:The present values of portfolio is defined as the contemporary values of the subsequent amount of money or called as stream of cash flow with defined rate of return.

A

Expert Solution

Answer to Problem 4PS

The present values of the portfolio= $ 118,421

Explanation of Solution

The expected cash flow is determined by the summation of the product of the probability with the cash flow in two scenarios.

Cash flow = $ 70,000 with probability 0.5

Cash flow = $200,000 with probability 0.5

expected cash flow=(0.5×$70,000)+(0.5×200,000)

The assumed cash flow = $135,000

Mentioned risk premium = 8%

Mentioned risk-free rate = 6%

Mentioned rate of return = 14%

The present value of portfolio is determined by dividing assumed cash flow by stated rate of return.

present value=expected cash flowrate of return.................... Equation (1)

Put the given values in Equ (1)

present value=$135,0001.14=$118,421

The present value of the portfolio = $118,421

B

Summary Introduction

To calculate:The assumed rate of return of the portfolio is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with identified rate of return.

B

Expert Solution

Answer to Problem 4PS

The assumed rate of return = $135,000

Explanation of Solution

The assumed rate of the return is calculated by the following formula −

expected rate of the return[E(r)]=present value of the portfolio×[1+E(r)] …………Equation (2)

expected rate of the return[E(r)]=$118,421×[1+0.14]

The assumed rate of return = $135,000

C

Summary Introduction

To calculate:Theamount which is paid for the portfolio at 12% risk premium is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a stated rate of return.

C

Expert Solution

Answer to Problem 4PS

The present value of the portfolio = $114,407

Explanation of Solution

Given that −

Risk premium = 12%

Risk-free rate = 6%

Required rate of return=12%+6%=18%

The present value of portfolio is ascertained by dividing assumed cash flow by identified rate of return.

present value=expected cash flowrate of return.................... Equ (1)

Put the given values in Equ (1)

present value=$135,0001.18=$114,407

The present value of the portfolio = $114,407

D

Summary Introduction

To calculate:The relation between risk portfolio and the amount at which it sell is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a expected rate of return.

D

Expert Solution

Answer to Problem 4PS

The portfolio with higher risk will sell at lower price. The portfolio (a) will be selling at lower price.

Explanation of Solution

The current value of the portfolio (a) = $118,421

The current value of the portfolio (c) = $114,407

The portfolio with higher risk will be selling at lower price and providing extra discount from assumed price is a consequence of risk.

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Answer 4

Question

Chapter 6, Problem 4PS

A

Summary Introduction

To calculate:The amount which is paid for the portfolio is 8% risk premium is to be determined.

Introduction:The present values of portfolio is defined as the contemporary values of the subsequent amount of money or called as stream of cash flow with defined rate of return.

A

Expert Solution

Answer to Problem 4PS

The present values of the portfolio= $ 118,421

Explanation of Solution

The expected cash flow is determined by the summation of the product of the probability with the cash flow in two scenarios.

Cash flow = $ 70,000 with probability 0.5

Cash flow = $200,000 with probability 0.5

expected cash flow=(0.5×$70,000)+(0.5×200,000)

The assumed cash flow = $135,000

Mentioned risk premium = 8%

Mentioned risk-free rate = 6%

Mentioned rate of return = 14%

The present value of portfolio is determined by dividing assumed cash flow by stated rate of return.

present value=expected cash flowrate of return.................... Equation (1)

Put the given values in Equ (1)

present value=$135,0001.14=$118,421

The present value of the portfolio = $118,421

B

Summary Introduction

To calculate:The assumed rate of return of the portfolio is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with identified rate of return.

B

Expert Solution

Answer to Problem 4PS

The assumed rate of return = $135,000

Explanation of Solution

The assumed rate of the return is calculated by the following formula −

expected rate of the return[E(r)]=present value of the portfolio×[1+E(r)] …………Equation (2)

expected rate of the return[E(r)]=$118,421×[1+0.14]

The assumed rate of return = $135,000

C

Summary Introduction

To calculate:Theamount which is paid for the portfolio at 12% risk premium is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a stated rate of return.

C

Expert Solution

Answer to Problem 4PS

The present value of the portfolio = $114,407

Explanation of Solution

Given that −

Risk premium = 12%

Risk-free rate = 6%

Required rate of return=12%+6%=18%

The present value of portfolio is ascertained by dividing assumed cash flow by identified rate of return.

present value=expected cash flowrate of return.................... Equ (1)

Put the given values in Equ (1)

present value=$135,0001.18=$114,407

The present value of the portfolio = $114,407

D

Summary Introduction

To calculate:The relation between risk portfolio and the amount at which it sell is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a expected rate of return.

D

Expert Solution

Answer to Problem 4PS

The portfolio with higher risk will sell at lower price. The portfolio (a) will be selling at lower price.

Explanation of Solution

The current value of the portfolio (a) = $118,421

The current value of the portfolio (c) = $114,407

The portfolio with higher risk will be selling at lower price and providing extra discount from assumed price is a consequence of risk.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 6, Problem 4PS

A

Summary Introduction

To calculate:The amount which is paid for the portfolio is 8% risk premium is to be determined.

Introduction:The present values of portfolio is defined as the contemporary values of the subsequent amount of money or called as stream of cash flow with defined rate of return.

A

Expert Solution

Answer to Problem 4PS

The present values of the portfolio= $ 118,421

Explanation of Solution

The expected cash flow is determined by the summation of the product of the probability with the cash flow in two scenarios.

Cash flow = $ 70,000 with probability 0.5

Cash flow = $200,000 with probability 0.5

expected cash flow=(0.5×$70,000)+(0.5×200,000)

The assumed cash flow = $135,000

Mentioned risk premium = 8%

Mentioned risk-free rate = 6%

Mentioned rate of return = 14%

The present value of portfolio is determined by dividing assumed cash flow by stated rate of return.

present value=expected cash flowrate of return.................... Equation (1)

Put the given values in Equ (1)

present value=$135,0001.14=$118,421

The present value of the portfolio = $118,421

B

Summary Introduction

To calculate:The assumed rate of return of the portfolio is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with identified rate of return.

B

Expert Solution

Answer to Problem 4PS

The assumed rate of return = $135,000

Explanation of Solution

The assumed rate of the return is calculated by the following formula −

expected rate of the return[E(r)]=present value of the portfolio×[1+E(r)] …………Equation (2)

expected rate of the return[E(r)]=$118,421×[1+0.14]

The assumed rate of return = $135,000

C

Summary Introduction

To calculate:Theamount which is paid for the portfolio at 12% risk premium is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a stated rate of return.

C

Expert Solution

Answer to Problem 4PS

The present value of the portfolio = $114,407

Explanation of Solution

Given that −

Risk premium = 12%

Risk-free rate = 6%

Required rate of return=12%+6%=18%

The present value of portfolio is ascertained by dividing assumed cash flow by identified rate of return.

present value=expected cash flowrate of return.................... Equ (1)

Put the given values in Equ (1)

present value=$135,0001.18=$114,407

The present value of the portfolio = $114,407

D

Summary Introduction

To calculate:The relation between risk portfolio and the amount at which it sell is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a expected rate of return.

D

Expert Solution

Answer to Problem 4PS

The portfolio with higher risk will sell at lower price. The portfolio (a) will be selling at lower price.

Explanation of Solution

The current value of the portfolio (a) = $118,421

The current value of the portfolio (c) = $114,407

The portfolio with higher risk will be selling at lower price and providing extra discount from assumed price is a consequence of risk.

Answer 6

Chapter 6, Problem 4PS

A

Summary Introduction

To calculate:The amount which is paid for the portfolio is 8% risk premium is to be determined.

Introduction:The present values of portfolio is defined as the contemporary values of the subsequent amount of money or called as stream of cash flow with defined rate of return.

A

Expert Solution

Answer to Problem 4PS

The present values of the portfolio= $ 118,421

Explanation of Solution

The expected cash flow is determined by the summation of the product of the probability with the cash flow in two scenarios.

Cash flow = $ 70,000 with probability 0.5

Cash flow = $200,000 with probability 0.5

expected cash flow=(0.5×$70,000)+(0.5×200,000)

The assumed cash flow = $135,000

Mentioned risk premium = 8%

Mentioned risk-free rate = 6%

Mentioned rate of return = 14%

The present value of portfolio is determined by dividing assumed cash flow by stated rate of return.

present value=expected cash flowrate of return.................... Equation (1)

Put the given values in Equ (1)

present value=$135,0001.14=$118,421

The present value of the portfolio = $118,421

Answer 7

Chapter 6, Problem 4PS

A

Summary Introduction

To calculate:The amount which is paid for the portfolio is 8% risk premium is to be determined.

Introduction:The present values of portfolio is defined as the contemporary values of the subsequent amount of money or called as stream of cash flow with defined rate of return.

Answer 8

A

Expert Solution

Answer to Problem 4PS

The present values of the portfolio= $ 118,421

Answer 9

A

Expert Solution

Answer 10

A

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

The expected cash flow is determined by the summation of the product of the probability with the cash flow in two scenarios.

Cash flow = $ 70,000 with probability 0.5

Cash flow = $200,000 with probability 0.5

expected cash flow=(0.5×$70,000)+(0.5×200,000)

The assumed cash flow = $135,000

Mentioned risk premium = 8%

Mentioned risk-free rate = 6%

Mentioned rate of return = 14%

The present value of portfolio is determined by dividing assumed cash flow by stated rate of return.

present value=expected cash flowrate of return.................... Equation (1)

Put the given values in Equ (1)

present value=$135,0001.14=$118,421

The present value of the portfolio = $118,421

Answer 13

B

Summary Introduction

To calculate:The assumed rate of return of the portfolio is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with identified rate of return.

B

Expert Solution

Answer to Problem 4PS

The assumed rate of return = $135,000

Explanation of Solution

The assumed rate of the return is calculated by the following formula −

expected rate of the return[E(r)]=present value of the portfolio×[1+E(r)] …………Equation (2)

expected rate of the return[E(r)]=$118,421×[1+0.14]

The assumed rate of return = $135,000

Answer 14

B

Summary Introduction

To calculate:The assumed rate of return of the portfolio is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with identified rate of return.

Answer 15

B

Expert Solution

Answer to Problem 4PS

The assumed rate of return = $135,000

Answer 16

B

Expert Solution

Answer 17

B

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

The assumed rate of the return is calculated by the following formula −

expected rate of the return[E(r)]=present value of the portfolio×[1+E(r)] …………Equation (2)

expected rate of the return[E(r)]=$118,421×[1+0.14]

The assumed rate of return = $135,000

Answer 20

C

Summary Introduction

To calculate:Theamount which is paid for the portfolio at 12% risk premium is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a stated rate of return.

C

Expert Solution

Answer to Problem 4PS

The present value of the portfolio = $114,407

Explanation of Solution

Given that −

Risk premium = 12%

Risk-free rate = 6%

Required rate of return=12%+6%=18%

The present value of portfolio is ascertained by dividing assumed cash flow by identified rate of return.

present value=expected cash flowrate of return.................... Equ (1)

Put the given values in Equ (1)

present value=$135,0001.18=$114,407

The present value of the portfolio = $114,407

Answer 21

C

Summary Introduction

To calculate:Theamount which is paid for the portfolio at 12% risk premium is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a stated rate of return.

Answer 22

C

Expert Solution

Answer to Problem 4PS

The present value of the portfolio = $114,407

Answer 23

C

Expert Solution

Answer 24

C

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Given that −

Risk premium = 12%

Risk-free rate = 6%

Required rate of return=12%+6%=18%

The present value of portfolio is ascertained by dividing assumed cash flow by identified rate of return.

present value=expected cash flowrate of return.................... Equ (1)

Put the given values in Equ (1)

present value=$135,0001.18=$114,407

The present value of the portfolio = $114,407

Answer 27

D

Summary Introduction

To calculate:The relation between risk portfolio and the amount at which it sell is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a expected rate of return.

D

Expert Solution

Answer to Problem 4PS

The portfolio with higher risk will sell at lower price. The portfolio (a) will be selling at lower price.

Explanation of Solution

The current value of the portfolio (a) = $118,421

The current value of the portfolio (c) = $114,407

The portfolio with higher risk will be selling at lower price and providing extra discount from assumed price is a consequence of risk.

Answer 28

D

Summary Introduction

To calculate:The relation between risk portfolio and the amount at which it sell is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a expected rate of return.

Answer 29

D

Expert Solution

Answer to Problem 4PS

The portfolio with higher risk will sell at lower price. The portfolio (a) will be selling at lower price.

Answer 30

D

Expert Solution

Answer 31

D

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

The current value of the portfolio (a) = $118,421

The current value of the portfolio (c) = $114,407

The portfolio with higher risk will be selling at lower price and providing extra discount from assumed price is a consequence of risk.

Answer 34

Ch. 6.A - Prob. 1P Ch. 6.A - Prob. 2P Ch. 6 - Prob. 1PS Ch. 6 - Prob. 2PS Ch. 6 - Prob. 3PS Ch. 6 - Prob. 4PS Ch. 6 - Prob. 5PS Ch. 6 - Prob. 6PS Ch. 6 - Prob. 7PS Ch. 6 - Prob. 8PS

The amount which is paid for the portfolio is 8% risk premium is to be determined. Introduction: The present values of portfolio is defined as the contemporary values of the subsequent amount of money or called as stream of cash flow with defined rate of return .

Concept explainers

Videos

To calculate:The amount which is paid for the portfolio is 8% risk premium is to be determined.

Introduction:The present values of portfolio is defined as the contemporary values of the subsequent amount of money or called as stream of cash flow with defined rate of return.

Answer to Problem 4PS

Explanation of Solution

To calculate:The assumed rate of return of the portfolio is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with identified rate of return.

Answer to Problem 4PS

Explanation of Solution

To calculate:Theamount which is paid for the portfolio at 12% risk premium is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a stated rate of return.

Answer to Problem 4PS

Explanation of Solution

To calculate:The relation between risk portfolio and the amount at which it sell is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a expected rate of return.

Answer to Problem 4PS

Explanation of Solution

Want to see more full solutions like this?

Chapter 6 Solutions

The amount which is paid for the portfolio is 8% risk premium is to be determined. Introduction: The present values of portfolio is defined as the contemporary values of the subsequent amount of money or called as stream of cash flow with defined rate of return .

Concept explainers

Videos

To calculate:The amount which is paid for the portfolio is 8% risk premium is to be determined. Introduction:The present values of portfolio is defined as the contemporary values of the subsequent amount of money or called as stream of cash flow with defined rate of return.

Answer to Problem 4PS

Explanation of Solution

To calculate:The assumed rate of return of the portfolio is to be determined. Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with identified rate of return.

Answer to Problem 4PS

Explanation of Solution

To calculate:Theamount which is paid for the portfolio at 12% risk premium is to be determined. Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a stated rate of return.

Answer to Problem 4PS

Explanation of Solution

To calculate:The relation between risk portfolio and the amount at which it sell is to be determined. Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a expected rate of return.

Answer to Problem 4PS

Explanation of Solution

Want to see more full solutions like this?

Chapter 6 Solutions

To calculate:The amount which is paid for the portfolio is 8% risk premium is to be determined.

Introduction:The present values of portfolio is defined as the contemporary values of the subsequent amount of money or called as stream of cash flow with defined rate of return.

To calculate:The assumed rate of return of the portfolio is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with identified rate of return.

To calculate:Theamount which is paid for the portfolio at 12% risk premium is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a stated rate of return.

To calculate:The relation between risk portfolio and the amount at which it sell is to be determined.

Introduction:The present value of portfolio is defined as the present value of the future amount of money or called as stream of cash flow with a expected rate of return.