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j. 1. Suppose investors raised their inflation expectations by 3 percentage points over current estimates as reflected in the 5.5% risk-free rate. What effect would

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j. 1. Suppose investors raised their inflation expectations by 3 percentage points over current estimates as reflected in the 5.5% risk-free rate. What effect would higher inflation have on the SML and on the returns required on high- and low-risk securities? 2. Suppose instead that investors' risk aversion increased enough to cause the market risk premium to increase by 3 percentage points. (Inflation remains constant.) What effect would this have on the SML and on returns of high- and low-risk securities

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