What Will Happen to the Security Market Line If: (1)

question 45

Multiple Choice

What will happen to the Security Market Line if: (1) inflation expectations increase, and (2) investors become more risk averse?

• A)shift up and have a steeper slope
• B)shift down and have the same slope
• C)shift down and have a steeper slope
• D)shift up but have less slope

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Definitions:

Notes

Short-term or medium-term debt obligations issued by companies or governments.

Floating-Rate Bonds

Bonds with variable interest rates that adjust periodically based on a benchmark or index rate.

Future Interest Rates

Future interest rates refer to the anticipated rates at which borrowers will be charged for loans or the return investors will earn on deposits, based on predictions.

Increase

A rise in the quantity or value of something, such as profits, revenue, weight, etc.