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Suppose that in year 2030, investors become much more willing than before to bear risk. As a result, they require a return of 8% to
Suppose that in year 2030, investors become much more willing than before to bear risk. As a result, they require a return of 8% to invest in common stocks rather than the 10% that they had required in the past. This shift in risk aversion causes a 15% change in the value of the market portfolio.
a. Do stock prices rise by 15% or fall? Rise by 15% or Fall by 15%
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