11. Changes to the security market line The following graph piots the current security market line (SML) and indicates the retum that investors require from holding stock from Happy Corp. (HC). Based on the gragh, complete the table that follows. An analyst believes that inflation is going to increase by 3.0% 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 Corpis 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 Corp.'s new required rate of return is Tool tip: Mouse over the points in the graph to see their coordinates. The SML. helps determine the level of risk aversion among investors. The steeper the slope of the SML, the the level of risk aversion. Which kind of stock is most affected by changes in risk aversion? (In other words, which stocks see the big in in their required returns?) All stocks affected the same, regardless of beta High-beta stocks Low-beta stocks Medium-beta stocks Tool tip: Mouse over the points in the graph