REQUIRED RATE OF RETURN (Percent) W 00 12 New SM D 04 16 20 RISK (Beta) the slope of the SML The SML helps determine the level of risk aversion among investors. The higher the level of risk aversion, the Which kind of stock is most affected by changes in risk aversion? (In other words, which stocks see the biggest change in their required returns?) O High-beta stocks O Medium-beta stocks O All stocks affected the same, regardless of beta Low-beta stocks