An investor has created a two -asset portfolio today by purchasing $40,000 in Treasury bills and $120,000 in the S&P 500 Index (market portfolio). Currently, the annual return on the Treasury bill is 2%, while investors seek 6% for the market portfolio risk premium. If the portfolio earns its required return each of the next 5 years, what will be the future value of this portfolio at the end of the 5th year?
Question 21 options:
$235,093 |
|
$194,664 |
|
$219,214 |
|
$131,874 |
|
$178,449 |
Proper solution provided.
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