Answer:
$178,241
Explanation:
The computation of the value of the portfolio is shown below:
= (Cash flow × equal probabilities + Cash flow × equal probabilities) ÷ ( 1 + risk-free investment + risk premium)
= ($115,000 × 0.5 + $270,000 × 0.5) ÷ ( 1 + (4% + 4%))
= ($57,500 + $135,000) ÷ (1.08)
= ($192,500) ÷ (1.08)
= $178,241
We simply multiply the cash flows with the equal probabilities and then divided it with the risk-free investment and risk premium
