All other things being equal, what is the major impact that an increase in the expected inflation rate would be anticipated to have on the security market line?
A) reduce its slope
B) shift it down and to the right
C) shift it up and to the left
D) reduce required returns for investors in any individual asset

Question

Quizplus · Accepted Answer

An increase in the expected inflation rate would cause an upward shift in the security market line, as investors would require higher returns to compensate for the inflation risk.

All Other Things Being Equal, What Is the Major Impact