Question $10$

Suppose that in $2023,$ investors become much less willing than before to bear

risk. As a result, they require a return of $12\%$ rather than the $6\%$ they had

required in the past. This shift in risk aversion causes a $35\%$ change in the value

of the market portfolio.

In which direction do stock prices change?

Rise by $35\%$

Fall by $35\%$