Consider a representative agent with CRRA utility. Her risk aversion is = 2 and the time discount rate is 1% (the subjective discount factor is = 0:99, so -ln() = 1%). The expected growth rate of the economy is 1% and the volatility is 2%. (A) What is the level of the risk-free rate in this economy? (B) Determine the change in the risk-free rate if the expected growth rate increases to 1.5%. What is the intuition? (C) If the market return volatility is 20%, what is the maximum level of equity risk premium that one could obtain in this economy?