What is the equilibrium value of the market risk premium, Financial Management

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What is the equilibrium value of the market risk premium

Let’s suppose the risk-free rate is 3% and the average investor has a risk-aversion coefficient of 1.4. Further, assume that the standard deviation for the market portfolio is 14%.

A) What is the equilibrium value of the market risk premium?

B) What is the expected rate of return on the market?

C) What is the equilibrium value of the market risk premium if the average investor had a risk aversion coefficient of 1.1 instead of 1.4?

D) Why does the answer in C go up or down?

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