Shifts in the security market line Assume that the risk-free rate, RF, is currently 7%, the market return, rm, is 12%, and asset A has a beta, bA, of 1.16. a. Use CAPM to estimate the required return, rA, on asset A. Which of the following graphs represents the security market line (SML) and the required return for asset A ? b. Assume that as a result of recent economic events, inflationary expectations have declined by 2%, lowering RF and rm to 5% and 10%, respectively. Which of the following graphs represents the new SML and shows the new required return for asset A ? c. Assume that as a result of recent events, investors have become more risk averse, causing the market return to rise by 1%, to 13%. Ignoring the shift in part b, which of the following graphs shows the new SML and the new required return for asset A ? Shifts in the security market line Assume that the risk-free rate, RF, is currently 7%, the market return, rm, is 12%, and asset A has a beta, bA, of 1.16. a. Use CAPM to estimate the required return, rA, on asset A. Which of the following graphs represents the security market line (SML) and the required return for asset A ? b. Assume that as a result of recent economic events, inflationary expectations have declined by 2%, lowering RF and rm to 5% and 10%, respectively. Which of the following graphs represents the new SML and shows the new required return for asset A ? c. Assume that as a result of recent events, investors have become more risk averse, causing the market return to rise by 1%, to 13%. Ignoring the shift in part b, which of the following graphs shows the new SML and the new required return for asset A