12.8 40 RISK IBetal PM Elements Value spremium (RPM) Happy Corp. stock's beta Required rate of returm on Happy Corp, stock 104% An analyst believes that inflation is going 2.0% over the next year, while te market nsk premium will be unchanged. The analyst uses the CapitaPricing Model (CAPM). The following graph plots the current SMIL 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 Corp.'s new required rate of return is12.4% Tool tip: Mouse over the points on the graph to see their coordinates - EQUIRED RATE OF RETURNIPercent) New SML 0.4 8 1 14 28 RISK IBetal The SML helps determine the risk-aversion level among investors. The steeper the slope of the SML, the the level of risk aversion. Which of the following statements best describes a shift in the SML caused by increased risk aversion? O The risk-free rate will decrease. O The risk-free rate will remain constant O The risk-free rate will increase