Required Rate of Return TH=13.0% 2 + SML: RPM x b TA==8.0% TL=5.5% L's Risk Premium Market Risk Premium, RPM. Also Stock A's Risk Premium FRF = 3.0% Risk-Free Return, FR 3 0.5 1 1.5 2 H's Risk Premium 2.5 Beta Coefficient A movement from SML line 1 to 2 indicates that investors require a return, causing stock prices to O Higher, Fall O Higher, Rise O Even, Hold Lower, Fall Lower, Rise