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Business, 20.11.2019 05:31 mario65

Other things held constant, if the expected inflation rate decreases and investors also become more risk averse, the security market line would be affected as follows:

answer

a) the y-axis intercept would decline, and the slope would increase.

b) the x-axis intercept would decline, and the slope would increase.

c) the y-axis intercept would increase, and the slope would decline.

d) the sml would be affected only if betas changed.

e) both the y-axis intercept and the slope would increase, leading to higher required returns.

if in the opinion of a given investor a stock's expected return exceeds its required return, this suggests that the investor thinks

a) the stock is experiencing supernormal growth.

b) the stock should be sold.

c) the stock is a good buy.

d) management is probably not trying to maximize the price per share.

e) dividends are not likely to be declared.

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