Hi
Here probabilities for each cash flow = 0.5
So expected cash flow F= 0.5*60000 + 0.5*175000
= 30000 + 87500 = $117,500
Rate of Return r= 12 %
time t = 1 year
Hence amount needs to be paid today P=F/(1+r)
P = 117,500/1.12 = $104,910.71
Thanks
6.6.0 Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either...
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A and B
thank you !!
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