The Security Market Line (SML) Relates Risk of Individual Securities

Multiple Choice

The Security Market Line (SML) relates risk of individual securities to their required rate of return. If investors conclude that the inflation rate is going to increase, which of the following change would occur?

A) The market risk premium would increase.
B) The beta of the stock would increase.
C) The slope of the SML would become steeper.
D) The standard deviation of the stock would increase.
E) The required return of an average stock would increase.