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Suppose a risky investment, with a required rate of return of 15 percent, offers to pay $100 three years from today (at t=3). Suppose the
Suppose a risky investment, with a required rate of return of 15 percent, offers to pay $100 three years from today (at t=3). Suppose the riskless rate is 2 percent. What is the implied deduction for risk (i.e., based on the corresponding certainty equivalent cash flow at t=3)?
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