Assume that you expect the standard deviation of a stock portfolio to be 0.15 next year and you have a risk aversion of 4 (A=4). a. What would be a guess of the portfolio’s (expected) risk premium? b....

Assume that you expect the standard deviation of a stock portfolio to be 0.15 next year and you have a risk aversion of 4 (A=4). a. What would be a guess of the portfolio’s (expected) risk premium? b. Find the risk aversion value if the risk premium was 0.06? c. What is the relationship between risk tolerance and risk premium? What do you conclude from your exercise?