Attempts: Do No Harm: 5 13. Changes to the security market line The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows. REQUIRED RATE OF RETURN (Percent) Return on HC's Stock 10 RISK (Beta) Value CAPM Elements Risk-free rate (CRP) Market risk premium (RPM) Happy Corp. stock's beta Required rate of return on Happy Corp, stock An analyst believes that inflation is going to increase by 3.0% over the next year while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML Calculate Happy Corp's new required return. Then, on the graph, use the green points rectangle symbols) to plot the new SML suggested by this analyst's prediction Happy Corp's new required rate of return is Tooltip: Mouse over the points in the graph to see their coordinates Tool tip: Mouse over the points in the graph to see their coordinates. New SM REQUIRED RATE OF RETURN (Percent) RISK (Beta) The SHL helos determine the level of risk aversion among investors. The steeper the slope of the SML, the among investors. The steeper the slope of the SML, the the level of risk aversion which ind of stock is most affected by changes in risk aversion? (In other words, which stocks see the biggest change in their required returns) Medium-beta stocks Low-beta stocks gh-beta stos stocks affected the same, regardless of beta