Risk-free rate : (5.5%, 5.0%, 2.8%, 10.4%) market risk premium: (3.4%, 4.5%, 5.9%, 8.1) happy Corp stocks beta: (1.9, 1.2, 2.8, 0.3) Required rate of return on happy Corp stock ( 13.0%, 9.4%, 8.8%, 10.4%)

Happy corps new required rate of return is: (13.6%, 12.4%, 8.7%, 28.5) The steeper the slope SML the (higher, lower)

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: Happy Corp.'s new required rate of return is The SML helps determine the level of risk aversion among investors. The steeper the slope of the SML, the the level of risk aversion. Which kind of stock is most affected by changes in risk aversion? (In other words, which stocks see the big je in their required returns?) High-beta stocks All stocks affected the same, regardless of beta Medium-beta stocks Low-beta stocks