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Suppose that the risk-free rate was 8% and the required rate of return on the marketwas 14%. A. Write out the security market line (SML),

Suppose that the risk-free rate was 8% and the required rate of return on the marketwas 14%. A. Write out the security market line (SML), and explain each term. A. Plot the SML on a sheet of paper. C.Suppose that inflation expectations increase such that the risk-free rate, increases to 10 percent and the required rate of return on the market increases to 16 percent. Write out and plot the new SML. D. Return to the original assumption in this problem. Now, Suppose that investors' risk aversion increases and the required rate of return on the market increases to 16 percent.(There is no change in the risk-free rate because risk free rate reflects the required rate of return on a riskless investment.) Write out and plot the new SML

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