Required Rate of Return TH=13.0% 2 SML: + RPM * b TA TM 8.0% 5.5% TRE 3.0% Risk-Free Return, FR 0.5 L's Risk Premium Market Risk Premium, RPM. Also Stock A's Risk Premium 3 H's Risk Premium 1.5 2 2.5 Beta Coefficient A movement from SML line 1 to 3 indicates what about investors risk aversion. Investors have become more risk averse Investors believe inflation will increase in the future O Investors have become less risk averse O Investors are indifferent to risk O Investors are demanding a higher return