Consider a representative agent with CRRA utility. Her risk aversion is y

$=$

$5$

$$and the time discount rate is

$8$

$=$

$0$

$.$

$0$

$1$

$.$

$$The expected growth rate of aggregate consumption is

$2$

$\%$

$$and the volatility is

$4$

$\%$

$.$

$$The equitymarket has a volatility of

$4$

$0$

$\%$

$$and a correlation of

$0$

$.$

$6$

$$with consumption growth.

$($

A

$)$

$$What is the level of equity risk premium in this economy?

$($

B

$)$

$$What is the level of expected equity return?