200 160 1.2, 10.4 120 Return on HC's Stock 1 REQUIRED RATE OF RETURN (Percent) 8.0 40 0.5 10 1.5 2.0 RISK (Beta) Value CAPM Elements Risk-free rate (TRF) 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 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 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 Tooltip: Mouse over the points on the graph to see their coordinates. 11. Changes to the security market line The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows: 200 16 0 RATE OF RETURN(Percent) 120 Return on HC's Stock 80 7:49 PM