LG 6 P8-29 Shifts in the security market line Asrume that the risk-free rate, Ro, is currently 8%; the market return, rm, is 12%; and asset A has a beta, A, of 1.10. a. Draw the security market line (SML) on a set of "nondiversifiable risk (x- b. Use the CAPM to calculate the required return, ra, on asset A, and depict c. Assume that as a result of recent economic events, inflationary axis)-required return (y-axis)" axes asset A's beta and required return on the SML drawn in part a. expectations have declined by 2%, lowering R, and r,n to 6% and 10%, respectively Draw the new SML on the axes in part a, and calculate and show the new required return for asset A d. Assume that as a result of recent events, investors have become more risk averse, causing the market return to rise by 1%, to 13%. Ignoring the shift in part c, draw the new SML on the same set of axes that you used before and calculate and show the new required return for asset A e. From the previous changes, what conclusions can be drawn about the impact of (1) decreased inflationary expectations and (2) increased risk aversion on the required returns of risky assets