Foundations of Financial Management Study Set 5
Quiz 11: Cost of Capital
An Increase in the Risk-Free Rate Causes the Sml to Shift
An increase in the risk-free rate causes the SML to shift down parallel to the old SML.
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An increase in investors' aversion to risk causes the SML to shift up parallel to the old SML.
A decrease in the risk free rate causes the SML to shift down parallel to the old SML.
A decrease in investors' risk aversion causes the slope of the SML to decline becoming more horizontal.
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