If All Investors Become More Risk Averse, the SML Will

question 3

Multiple Choice

If all investors become more risk averse, the SML will ________ and stock prices will ________.

• A) shift upward; rise
• B) shift downward; fall
• C) have the same intercept with a steeper slope; fall
• D) have the same intercept with a flatter slope; rise

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Definitions:

Market Basket

A collection of goods and services considered representative for measuring inflation or the cost of living in an economy.

Price Increase

A price increase refers to a rise in the cost of goods or services, which can affect consumer demand and purchasing power.

CPI

This index, the Consumer Price Index, measures how the average prices of various consumer services and goods, including food, transportation, and healthcare, evolve using a weighted average technique.

Tooth Fairy

A mythical figure in Western cultures that exchanges lost baby teeth for a small payment when placed under a child's pillow.