20. 01 REQUIRED RATE OF RETURN (Percent) RISK (Beta) Value CAPM Elements Risk-free rate (TRP) Market risk premium (RPM) Happy Corp. stock's beta Required rate of return on Happy Corp. stock An analyst believes that inflation is going to increase by 4.00% 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 return. Then, on the graph, use the rectangle symbols to plot the new SM suggested by this analyst's prediction. Happy Corp.'s new required rate of return is New SML REQUIRED RATE OF RETURN (Percent RISK (Beta)