How Would the Security Market Line Be Affected, Other Things

question 77

Multiple Choice

How would the Security Market Line be affected, other things held constant, if the expected inflation rate decreases and investors also become more risk averseσ

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

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Definitions:

Unearned Subscription Revenue

Revenue received in advance for services or goods to be provided in the future, recognized as a liability until delivered.

Subscription Revenue

Income generated from customers who pay a recurring price at regular intervals for access to a product or service.

Quarterly

Pertaining to a period of three months or a quarter of a year, often used in finance to denote regular intervals for reporting or payment.

Accumulated Depreciation

The total amount of depreciation expense that has been reported in accounting periods up to the current date for an asset, reducing its book value.