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

question 48

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,r_s,than on the interest rate on long-term debt,r_d,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.

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Definitions:

Peripheral Route

A method of persuasion that relies on superficial cues rather than the message's substantive aspects, as outlined in the Elaboration Likelihood Model of persuasion.

Scientific Data

Information collected through systematic observation or experimentation, used to validate or refute hypotheses.

Elaboration Likelihood Model

The idea that an individual’s thoughts about a persuasive message (rather than the message itself) determine whether attitude change will occur.

Peripheral Route

A method of persuasion that relies on superficial cues or associations, such as attractiveness or celebrity endorsement, rather than logical arguments.