Business, 23.10.2019 17:50 pet33

Suppose you forecast that the standard deviation of the market return will be 20% in the coming year. if the measure of risk aversion in picture is a = 4: a. what would be a reasonable guess for the expected market risk premium? market risk premium 0.08 % b. what value of a is consistent with a risk premium of 9%? (round your answer to 2 decimal places.) consistent value of a 2.25 c. what will happen to the risk premium if investors become more risk tolerant? increased risk tolerance means decreased risk aversion (a), which results in a(n) in risk premiums.

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Suppose you forecast that the standard deviation of the market return will be 20% in the coming year...