Points on first graph:

(0,5), (1.2,10.4), (2,14)

slope = 4.5, Y intercept = 5

Points on second graph:

(0,5), (2,14)

slope = 4.5, Y intercept = 5

The following grapplets the current security market line (SM) and indicates the return the investors require from holding stock from Happy Corp. (HC). Based on the graph complete the table that flows. 00 05 10 15 RISK 20 Value CAPM Elements Risk-freerateru Market risk premium (RA) Happy Carp stock's bets Required rate of retum on Happy Carp stock An analyst believes that ination is going to increase by 2.0% over the next year, while the market r um wil be unchanged. The analyst uses the Capital Asset Pricing Model (CAP). The following graph plots the current SML Calculate Happy Carp's new required return. Then, on the graph use the green points (rectangle symbols) to plet the new SML suggested by this analyst's prediction Happy Carp's now required rate of retumis Tooltip: House over the points on the graph to see their coordinates. 00 0 0 12 16 20 RISKI The SML helps determine the level of risk version among investors. The steper the slope of the SHL, the the level of risk version Which kind of stock is most affected by changes in risk version (In other words, which stedes see the biggest change in their required returns?) Medium beta stades O High beastedes O Alstedes affected the same, regardless of bats Low betastedes