If Expectations for Long-Term Inflation Rose, but the Slope of the SML

question 13

True/False

If expectations for long-term inflation rose, but the slope of the SML remained constant, this would have a greater impact on the required rate of return on equity, rs, than on the interest rate on long-term debt, rd, for most firms. In other words, the percentage point increase in the cost of equity would be greater than the increase in the interest rate on long-term debt.

---

Definitions:

Disparate Treatment

A legal term for when an employee is treated differently than others in the workplace based on protected characteristics, such as race or gender, which is illegal under employment law.

Title VII

A section of the Civil Rights Act of 1964 prohibiting employment discrimination based on race, color, religion, sex, or national origin.

Title VII

A provision in the Civil Rights Act of 1964 that forbids job discrimination on the grounds of race, color, religion, gender, or national origin.

Foreign Corporations

are business entities that are incorporated in one state but are doing business in another where they must register as a foreign corporation.