11. Changes to the security market line The following graph plots the current security market tine (SML) and indicates the return that investors require from holding stock from rappy Corp. (HC). Based on the graph, complete the table that follows: An analyst believes that inflation is going to increase by 2.0% over the next year, while the market risk premlum will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML. Calculate Happy Corpis new required retura. 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 Ch 08: Assignment - Risk and Rates of Return nappy coip.s iew iequHeu rate vireciun 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 higher the level of risk aversion, the the slope of the SML. The SML helps determine the risk-aversion level among investors. The higher the level of risk aversion, the the slope of the 5ML. Which of the following statements best describes a shift in the SML caused by increased risk aversion? The risk-free rate will remain constant. The risk.free rate will decrease. The risk free rate will increase