(15 pts) Assume that the Capital Asset Pricing Model holds. If there is a decrease in the risk-free rate, with no change

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answerhappygod
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(15 pts) Assume that the Capital Asset Pricing Model holds. If there is a decrease in the risk-free rate, with no change

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(15 pts) Assume that the Capital Asset Pricing Model holds. If
there is a decrease in the risk-free rate, with no changes to risk
or expected returns of risky assets,
a) Does that make investors better off
or worse off?
b) Does your answer in a) depend on
the risk tolerance of the investor? If so, how? Use a graph to
illustrate your argument.
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