Other Things Held Constant,in Which Way Would the Security Market

question 102

Multiple Choice

Other things held constant,in which way would the Security Market Line shift if the expected inflation rate decreases and investors also become more risk averse?

• A)It would shift down and have a steeper slope.
• B)It would shift up and have a less steep slope.
• C)It would shift up and keep the same slope.
• D)It would shift down and keep the same slope.

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Definitions:

Dividend Payout Ratio

The proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage of the company's earnings.

Return on Equity (ROE)

A financial ratio that measures the profitability of a company in relation to shareholders' equity.

Accounting Principles

The standardized guidelines and rules for financial reporting and accounting practices, ensuring transparency and consistency.

Equity Value

The total value of a company's shares of stock, representing the portion of the company's total value owned by its shareholders.