We learned that if the market interest rate for a given bond increased, the price...
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Accounting
We learned that if the market interest rate for a given bond increased, the price of the bond would decline. Applying this same logic to stocks, explain (a) how a decrease in risk aversion would affect stocks' prices and earned rates of return; (b) how this would affect risk premiums as measured by the historical differences between returns on stocks and returns on bonds; and (c) what the implications of this would be for the use of historical risk premiums when applying the CAPM equation.
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