Assume that a lot of investors become less risk averse in the result of the stock market boom. According to CAPM, what should happen with the equilibrium risk premium of the stock market and why?

a.

The premium will stay the same because it is independent from risk aversions of investors

b.

It will increase because market will clear only at a smaller price of the stock market

c.

It will increase because market will clear only at a higher price of the stock market

d.

It will decrease because market will clear only at a higher price of the stock market

e.

None of the above