What Will Happen to the Security Market Line (SML) If

question 12

Multiple Choice

What will happen to the security market line (SML) if the following events occur, other things constant: (1) inflation expectations increase, and (2) investors become more risk averse?

• A) shift up and keep the same slope
• B) shift up and have less slope
• C) shift up and have a steeper slope
• D) shift down and keep the same slope
• E) shift down and have less slope

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Definitions:

Capitalism

An economic system where private ownership and free markets govern trade and production with the primary goal of profit.

Business Enterprises

Business Enterprises refer to organizations engaged in commercial, industrial, or professional activities.

Elite Theory

posits that societal power is concentrated in the hands of a small, elite group, and that this minority makes the most important political decisions.

Self-Interest

Actions or decisions motivated by personal gain or benefit, often used in the context of economic behaviors and theories.