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An investor has a risk aversion of 6 . If she wants to invest all her wealth in the stock market that has a standard

An investor has a risk aversion of

6 .

If she wants to invest all her wealth in the stock market that has a standard deviation of

15 % .

What is the implied risk premium of the market? What is the market risk premium if she has a risk aversion of only

3 ?

Why is the risk premium different for different levels of risk aversion?

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