Question: 8. a. Suppose you forecast that the standard deviation of the market return will be 20% in the coming year. If the measure of risk

8. a. Suppose you forecast that the standard deviation of the

8. a. Suppose you forecast that the standard deviation of the market return will be 20% in the coming year. If the measure of risk aversion in Equation 5.16 is A = 4, what would be a reasonable guess for the expected market risk premium? b. What value of A is consistent with a risk premium of 9%? c. What will happen to the risk premium if investors become more risk tolerant? (LO 5-4)

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