The SML might shift in response to various economic changes. A change in the SML affects security prices and rates of return. b. Disregard Question 10a and assume that investors' risk aversion increased enough to cause the market risk premium to rise by 1 percentage points. Explain what effect this would have on the SML and on returns of high-risk versus low-risk securities. C, Discuss the kinds of changes Questions 10a and 10b would have on short-run and long-run effects; for example, might an increase in expected inflation lead to lower returns in the short run followed by higher returns in the long run