Required return on Stock- Risk-free retura + (Market risk premium)(Stock's beta) If a stock's expected returnm plots on or above the SML, then the stock's return is ufclent to compensate the investor for nisk. If a stock's expected returm pliots below the SML, the stock's return is Ineumiclent D to compensate the investor for risk. The SML ine can change due to expected infatiog and risk aversion. If the SML risk (hence its beta coefficient) through changes in the composition of its assets and through changes in the amount of debt it uses Quantitative Problem: You are given the following Information for Wine and Cork Enterprises (WCE): nfatioo and risk aversion. If infation changes, then the SML plotted on a graph will shift up or down paraliel to the old SMIL If nis n, " 3%; m.8%; RPM-5%, and beta-1.3 What is WCE's required rate of retum? Round your answer to 2 decimal places. Do not round intermediate caloulations 9.50 % lf inflation increases by 3% but there is no change in investors' risk aversion, what is wces requred rate of return now? Round your answer to tie decanal places. Do not rend 12.50 Assume now that there is no change in inflation but risk aversion increases by 29, what is wces required rate or return now? Round your answer to two dedmal places round intermediate calculations. o not If inflation ncreases by 3% and risk aversion increases by 2%, what is WCE's required rate of return now? Round your answer to two donal places. Donot rend intermedate calculations