PARTJ (1) Suppose investors raised their inflation expectations by 3 percentage points over current estimates as reflected in the 3.0% risk-free rate. What effect would higher inflation have on the SML and on the returns required on high- and low-risk securities? (2) Suppose instead that investors' risk aversion increased enough to cause the market risk premium to increase by 3 percentage points. (Inflation remains constant.) What effect would this have on the SML and on returns of high- and low-risk securities? Scenario 1: Inflation increases by 3%, no effect on RPM Scenario 2: Average investor risk aversion (RP) increases by 3% old RF old RPM Scenario 1 3.0% 5.0% 1.00 Inflation 3% old RF old RPM b 1 RPM Scenario 2 3.0% 5.0% 1.00 3.0% b new r RF new RPM Req return 6.0% 5.0% new r RF new RPM Req return 3.0% 8.0%