Risk-free rate: 5% 2.8% 10.4% 5.5%

Market risk premium: 8.1% 5.9% 3.4% 4.5%

Happy Corp. stock's beta: 1.9 2.8 1.2 0.3

Required rate of return on: 10.4% 8.8% 9.4% 13%

Happy Corp.'s new required rate of return is ________ 8.7% 28.5% 12.4% 13.6%

New SML on Graph

The SML helps determine the level of risk aversion among investors. The flatter the slope of the SML, the (lower, higher) the level of risk aversion.

The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows. REQUIRED RATE OF RETURN (Percent] 20.0 16.0 Return orn HC's Stock 12.0 8.0 4.0 0.0 0.5 1.0 1.5 2.0 RISK (Beta)