Potash Corp stock has a beta of 1.1, while Tim Horton's stock has a beta of 1.4. The risk-free rate is 1.9%, and the expected return on a portfolio with 30% weight in Potash and the remainder in Tim Horton's is 9.76%. What is the market risk premium? a) 7.2%
b) 7%
c) 6.9%
d) 7.9%
e) 6%

7.2%

Explanation:

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.

answer; the correct answer is (0.08);