Respuesta :
The risk premium of portfolio containing stock of Starcent and Jpod will be 17.5%
Expected return = (return from Starcents * Weight of investment) + (return from Jpod * Weight of investment)
Expected return on both projects = (25% * 0.5) + (20% * 0.5)
Expected return on both projects = 22.5%
Risk premium of the portfolio = Expected return - Risk-free return
=22.5% - 5%
Risk premium of the portfolio = 17.5%
The investment return that an asset is anticipated to generate over and above the risk-free rate of returns is characterized as a risk premium. Investors receive compensation in the form of a stock's risk premium. It serves as remuneration to investors for their willingness to take greater risk in a particular investment than in a risk-free asset.
Consider risk premium as a specific investment insurance. A person assigned to risky labor anticipates getting hazard pay as payment for the risks they assume. It's comparable to making risky investments. For an investor to be willing to take on the risk of sacrificing a portion or all of their cash, a risky venture must have the opportunity for higher returns.
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