Brandon's risk premium given the information in problem 25 is
A) 250
B) 325
C) 17.5
D) 18.75

Question

Quizplus · Accepted Answer

To calculate Brandon's risk premium, we need to find the difference between the rate of return on the risky portfolio and the risk-free rate. In problem 25, we are given that the rate of return on the risky portfolio is 16.5% and the risk-free rate is 12.75%. Therefore, the risk premium is:

Risk premium = 16.5% - 12.75% = 3.75%

To calculate the dollar value of the risk premium, we multiply the risk premium by the amount invested:

Risk premium = 3.75% x $500 = $18.75

Therefore, the answer is D, 18.75.

Brandon's Risk Premium Given the Information in Problem 25 Is