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

question 57

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, rs, than on the interest rate on long-term debt, rd, for most firms.Therefore, the percentage point increase in the cost of equity would be greater than the increase in the interest rate on long-term debt.

---

Definitions:

Confidence

The feeling or belief that one can rely on someone or something; a sense of self-assurance arising from one's appreciation of one's abilities or qualities.

Female Students

Refers specifically to students who identify as female, highlighting the consideration of gender in educational and psychological studies.

Disidentification

A psychological process where an individual detaches their sense of identity from a particular social role or group membership, especially if it threatens their self-esteem.

Computer Programming

The process of designing, writing, testing, and maintaining the source code of computer programs.