11. Changes to the security market line The following graph plots the current SML and indicates the retum that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows. REQUIRED RATE OF RETURN Percent 200 16.0 12.0 Return on HC's Stock 4.0 0.0 0.5 1.0 1.5 2.0 RISK IBeta) CAPM Elements Value Risk-free rate (RF) Market risk premium (RPM) Happy Corp. stock's beta Required rate of retum 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 SML Calculate Happy Corp.'s new required retum. 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 retum is Tool tip: Mouse over the points on the graph to see their coordinates