Prices of financial assets


Problem: Suppose the market risk premium is currently 6%. If investors were to become more risk-averse, the market risk premium might increase to 8%. If investors become more risk-averse, what effect would you expect this to have on the prices of financial assets?

Prices would increase?

Prices would be unaffected?

Prices would decrease?

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Accounting Basics: Prices of financial assets
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