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Assume that you expect the economy's rate of inflation to be 2 percent, giving an fifR of 7 percent and a market return (Ry) of
Assume that you expect the economy's rate of inflation to be 2 percent, giving an fifR of 7 percent and a market return (Ry) of 10 percent. a. Chaose the correct SML graph under these assumptions. The correct groph is B. Security market Line C. Rate of Returnf D. Rate of Return b. Subsequentiy, you expect the rate of inflation to increase from 2 percent to 4 percent. What effect would this have on the RFR and the Rim? A change in risk-free rate, with other things being equal, would result in a new SML. which would intercept with the axis at the new risk-free rate and be paralel to the original 5ML. Choose the correct SML graph. The correct graph is A. Security market Line salect. B be parallel to the original SMLa. Choose the correct SML graph. The correct graph is -select- 0 . A. Security market Line B. Security market Line Rate of Returnf B. Security market Line Systematic Risk (Beta) C. Rate of Return c. Choose on SML on the same graph to reflect an RFR of 9 percent and an RM of 14 percent. The correct graph is c. Choose an SML on the same graph to reflect an RFR of 9 percent and an RM of 14 percent. The correct graph is apter 07: Assignment - Asset Pricing Models B. Security market Line C. Rate of Return f How does this SML differ from that derived in Part b? Round your answer to two decimal places. New SMLe will have an intercept at and a slope so it be parallel to SML
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