Back to Assignment Attempts Score 15 8. 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. 200 160 120 ED RATE OF RETURN (Percent Return on HG Stock You are screen sharing Stap Share IL Pause Share Security Parante New are Annette Remote Control More Ich o 2 . 48:16 200 169 120 REQURED RATE OF RETURN Percent) Return lock 00 20 1 05 15 20 10 RISK Value CAPM Elements Rusk-free rute (T) Market risk premium (RPM) Happy Corp. stock's beta Required rate of return on Happy Corp. stock 4.5 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 analyses the Capital Asset Pricing Model (CAP). The following graph plots the current SML Calculate Happy Corp: required return. Then, on the graph in the green points rectangle symbols) to plet the new SML gested by this analyst's prediction Happy Corp new required rate of returns Tooltip: More over the points in the graph to see the coordinates 48:16 760 120 REQUIRED RATE OF RETURN Percent) Return lock 20 1 1 05 15 20 10 RISKB REQUIRED RATE OF 04 TE 20 08 12 RISK (Detal The SML help determine the level of risk version among investors. The higher the level of nisk von, the the slope of the 5ML Which kind of stock is most affected by changes in tisk version? In other words, which stocks see the biggest change in their required retur? All stocks affected the same, regardless of beta O High-beta stocks Medium-bets stocks Low bestodes Continue REQUIRED RATE OF 04 TE 20 08 12 RISK (Detal The SM help determine the level of risk aversion among investors. The higher the level of nisk von, the the slope of the SML Which kind of stock is most affected by changes in elk version? In other words, which stocks see the biggest change in their required retums.?) All stocks affected the same, regardless of beta High-bets stocks Medium-beta stocks O Low bets stocks Login