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Chapter 8 1) If investor's aversion to risk increased, would the risk premium on a high-beta stock increase by more or less than that on

Chapter 8

1) If investor's aversion to risk increased, would the risk premium on a high-beta stock increase by more or less than that on a low-beta stock? Explain

2) Is it possible to construct a portfolio of real-world stocks that has a required return equal to the risk-free rate? Explain.

Chapter 9

3) For a stock to be in equilibrium, two conditions must hold. What are they? Explain.

4) If a stock is not in equilibrium, explain how financial markets adjust to bring it into equilibrium.

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