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:

Hertz

The unit of frequency in the International System of Units (SI), equating to one cycle per second.

Auditory Neuron

a nerve cell that is involved in the process of hearing, transmitting auditory signals from the ear to the brain.

Pitch

Pitch refers to the perceived frequency of a sound, determining how "high" or "low" it sounds.

Basilar Membrane

A membrane running the length of the cochlea; sound waves cause a deformation of this membrane, bending the hair cells in the cochlea and thus stimulating the auditory receptors.