7. Changes to the security market line The following graph plots the current security market line (SML) and indicates the retum that investors require from holding stock from Hoppy Corp. (HC). Based on the graph, complete the table that follows: An analyst believes that infiation 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 retum. 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 Tool tip: Mouse over the points on the graph to see their coordinates. Ch 08- Assignment-Risk and Rates of Return The SML helps determine the risk-aversion level among investors. The higher the level of risk aversion, the the siope of the sML. Which of the following statements best describes the shope of the sML if investors were not at all risk aver The sML would have a negative slope. The 5Mt would be a horizontal line. The sMi would have a positive slope, but the slope would be steeper than it would be if investors were risk averse. 7. Changes to the security market line The following graph plots the current security market line (SML) and indicates the retum that investors require from holding stock from Hoppy Corp. (HC). Based on the graph, complete the table that follows: An analyst believes that infiation 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 retum. 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 Tool tip: Mouse over the points on the graph to see their coordinates. Ch 08- Assignment-Risk and Rates of Return The SML helps determine the risk-aversion level among investors. The higher the level of risk aversion, the the siope of the sML. Which of the following statements best describes the shope of the sML if investors were not at all risk aver The sML would have a negative slope. The 5Mt would be a horizontal line. The sMi would have a positive slope, but the slope would be steeper than it would be if investors were risk averse