the price of money (e.g., interest rates and equity capital costs) increases due to an increase in anticipated inflation, the risk-free rate will also increase If there is no change in investors' risk aversion, then the market risk premium (rM − rRF) will remain constant Also, if there is no change in stocks' betas, then the required rate of return on each stock as measured by the CAPM will increase by the same amount as the increase in expected inflation.

Question

Quizplus · Accepted Answer

This statement accurately describes the impact of an increase in anticipated inflation on interest rates, equity capital costs, risk-free rates, market risk premiums, and the required rate of return as measured by the CAPM.

The Price of Money (E