If the Price of Money (E

question 144

True/False

If the price of money (e.g.,interest rates and equity capital costs)increases due to an increase in anticipated inflation,the risk-free rate will also increase.If there is no change in investors' risk aversion,then the market risk premium (r_M -r_RF)will remain constant.Also,if there is no change in stocks' betas,then the required rate of return on each stock as measured by the CAPM will increase by the same amount as the increase in expected inflation.

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Definitions:

Counterproductive

Actions or behaviours that have the opposite effect of what is intended or desired, often hindering achievement.

Clarification

The act of making a statement or situation less confused and more comprehensible.

Paraphrasing

The process of rewording or rephrasing someone else’s statement to ensure understanding or to provide clarity.

Verbal Listening Responses

Responses in a conversation that indicate active listening, such as paraphrasing, summarizing, and asking questions.