Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $50,000 or $150,000, with
equal probabilities of 0.5. The alternative risldess investment in T-bills pays 5%.

at If you require a risk premium of 10%, how much will you be willing to pay for the portfolio?

b. Suppose the portfolio can be purchased for the amount you found in (a). What will the expected rate of return on the
portfolio be?

c Now suppose you require a risk premium of 15%. What is the price you will be wilfing to pay now?

d. Comparing your answers to (a) and (c). what do you conclude about the relationship between the required risk premium
on a portfolio and the price at which the portfolio will sell?

The struter partnership has total partners’ equity of $510,000, which is made up of main, capital, $400,000, and frist, capital, $110,000. the partners share net income and loss in a ratio of 80% to main and 20% to frist. on november 1, adison is admitted to the partnership and given a 15% interest in equity and a 15% share in any income and loss. prepare journal entries to record the admission of adison for a 15% interest in the equity and a 15% share in any income and loss under the following independent assumptions. (1) record the admission of adison with an investment of $90,000 for a 15% interest in the equity and a 15% share in any income and loss. (2) record the admission of adison with an investment of $120,000 for a 15% interest in the equity and a 15% share in any income and loss. (3) record the admission of adison with an investment of $80,000 for a 15% interest in the equity and a 15% share in any income and loss.

What is used by accountant to analyze transactions ?

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