Question: Tool tip: Mouse over the points on the graph to see their coordinates. ? 20 New SML 18 12 REQUIRED RATE OF RETURN (Percent) 8

Tool tip: Mouse over the points on the graph to see their coordinates. ? 20 New SML 18 12 REQUIRED RATE OF RETURN (Percent) 8 004 2.0 08 12 RISK Beta The SML helps determine the level of risk aversion among investors. The higher the level of risk aversion, the the slope of the SML Which kind of stock is most affected by changes in risk aversion? (In other words, which stocks see the biggest change in their required returns >> O Low-beta stocks Medium-beta stocks High-beta stocks All stocks affected the same, regardless of beta

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