The correct answer is: A. steeper, greater
The risk premium is the additional return that investors demand for taking on additional risk. The slope of the line is the relationship between risk and return. In a case where average investors risk aversion is greater than the slope of the line, the line will be steeper and the risk premium will be greater. This is because investors are more risk-averse and are demanding a higher return for taking on additional risk.
Here is a diagram that illustrates the relationship between risk and return:
[Diagram of a line with a positive slope]
The line represents the relationship between risk and return. The higher the risk, the higher the return. The slope of the line is the relationship between risk and return. In this case, the slope is positive, which means that there is a positive relationship between risk and return.
In a case where average investors risk aversion is greater than the slope of the line, the line will be steeper. This is because investors are more risk-averse and are demanding a higher return for taking on additional risk. The risk premium will also be greater. This is because investors are demanding a higher return for taking on additional risk.
Here is a diagram that illustrates the relationship between risk and return in a case where average investors risk aversion is greater than the slope of the line:
[Diagram of a steeper line with a positive slope]
The line in this diagram is steeper than the line in the previous diagram. This is because investors are more risk-averse and are demanding a higher return for taking on additional risk. The risk premium is also greater. This is because investors are demanding a higher return for taking on additional risk.