Suppose we live in a one-factor APT economy and that one factor is the market. Suppose you wake up this morning and realise that the market has just become a lot riskier (but assume betas are constant). Immediately following the increase in market risk:

Group of answer choices

Market prices decrease and expected market returns decrease

Market prices increase and expected market returns increase

Market prices increase and expected market returns decrease

Market prices decrease and expected market returns increase