Ch $02$: Assignment $-$ Risk and Return: Part I

An analyst believes that inflation is going to increase by $3\mathrm{.}0\%$ 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.$\text{'}$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.$\text{'}$s new required rate of return is

Tool tip: Mouse over the points on the graph to see their coordinates.