Required return on Stock - Risk-free return +(Market rink premium)(Stock's beta) If a stock's expected return plots on or above the SML, then the stock's return is Select to compensate the investor for risk. If a stock's expected return plots below the SML to compensate the investor for risk the stock's return is elect The SML line can change due to expected Inflation and risk version. It inflation changes, then the SML plotted on a graph will shift up or down parallel to the old SML frisk version changes, then the SML plotted on a graph will rotate up or down becoming more or less steep it investors become more or less risk verse. A firm can influence market 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): -3% -10% RP-7%, and beta - 1.1 What is WCE's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places If inflation increases by 2 but there is no change in investors' risk version, what is WCEs required rate of return now? Do not round intermediate calculations. Round your answer to two decimal places Assume now that there is no change in infiation, but risk version increases by 1. What is WCE's required rate of return now? Do not found intermediate calculations. Round your answer to two decimal places If inflation increases by 2 and risk version increases by 19, what is WC's required rate of return now? Do not found intermediate calculations Pound your answer to two decal places