Shifts in the security market line Assume that the risk-free rate, RF, is currently 6%, the market return, rm, is 11%, and asset A has a beta, ba, of 0.63. 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 Rp and I'm to 4% and 9%, 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 2%, 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 6%, the market return, rm, is 11%, and asset A has a beta, ba, of 0.63. 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 Rp and I'm to 4% and 9%, 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 2%, 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