Other Things Held Constant,if the Expected Inflation Rate Decreases and Investors

question 124

Multiple Choice

Other things held constant,if the expected inflation rate decreases and investors also become more risk averse,the Security Market Line would be affected as follows:

• A) The y-axis intercept would decline,and the slope would increase.
• B) The x-axis intercept would decline,and the slope would increase.
• C) The y-axis intercept would increase,and the slope would decline.
• D) The SML would be affected only if betas changed.
• E) Both the y-axis intercept and the slope would increase,leading to higher required returns.

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Definitions:

Battle of the Sexes

A concept in game theory where two players (often representing different genders) have different preferences over the outcome of a game.

Matching Pennies

A classic example of a zero-sum game where two players must secretly choose between a penny facing heads or tails, with outcomes depending on whether the choices match or not.

Nash Equilibrium

A concept in game theory where no player can benefit by changing strategies while the other players keep theirs unchanged, indicating a state of mutual best responses.

Simultaneous Game

A strategic situation in which each player makes decisions at the same time, without knowledge of the other players' actions.