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Suppose that Federal Reserve actions have caused an increase in the risk-free rate, r RF . Meanwhile, investors are afraid of a recession, so the
Suppose that Federal Reserve actions have caused an increase in the risk-free rate, rRF. Meanwhile, investors are afraid of a recession, so the market risk premium, (rM rRF), has increased. Under these conditions, with other things held constant, which of the following statements is most correct?
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