Multiple Choice
Assume that the Security Market Line (SML) is based on a risk free rate of 5% and a market rate of 11%. What will happen to the SML if the forecast of inflation increases and investors become more risk averse?
A) The SML will shift down and have a steeper slope
B) The SML will shift up and have a less steep slope
C) The SML will shift down and have the same slope
D) The SML will shift down and have a less steep slope
E) The SML will shift up and have a steeper slope
Correct Answer:
Verified
Correct Answer:
Verified
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