This is all one question...

CAPM Elements Risk-free rate ( rRF) 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 2.0% 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 5ML. 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 Corpis new required rate of return is Tool tip: Mouse over the points on the graph to see their coordinates: The SML helps determine the risk-aversion level among investors. The steeper the slope of the SML, the the level of risk everaian: Which of the following statements best destribes a shift in the SML caused by increased risk aversion? The risi free rate eul decrease. The risk-free rate will remain constant The risk-fret rete will increase