Assume that investors have recently become more risk averse, so the market risk premium has increased. Also, assume that the risk-free rate and...
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Assume that investors have recently become more risk averse, so the market risk premium has increased. Also,

assume that the risk-free rate and expected inflation have not changed. Which of the following is most likely to occur ?

A) the require rate will decline for stocks whose bets is less than 1

B) the required rate for an average stock will increase by an amount equal to the increase in the market risk premium

C) the required rate of the market will not change

D) the required rate for each stock in the market will increase by an amount equal to the increase in the market risk premium

Top Answer

B) the required rate for an average stock... View the full answer

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