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 12.0 Return on HC's Stock 8.0 20 00 05 10 15 RISK IBetal CAPM Elements Value Risk-free rate (rar) Market risk premium (RP) Happy Corp. stock's beta Required rate of return on Happy Corp. stock An analyst believes that infation is going to increase by 3.0% over the next year, while the market risk premium will be unchanged The analyst uses the Capital Asset Pricing Model (CAPH) The foilowing graph picts the aurrent SM Calculate Happy Corp.'s new required return Then, on the graph, se the the new SM suggested by this analyst's prediction een points (rectangle symbols) to plot Happy Corp s new required rate of retum i Tool tip Moune over the points on the gaph REQUIRED RATE OF RETURN Percent) 20 New SML 12 0 0.0 0.4 0.8 1.2 1,6 2.0 RISK (Betal Clear All The SML helps determine the level of risk aversion among investors. The higher the level of risk aversion, the the slope of the SML. Which kind of stock is most affected by changes in risk aversion? (In other words, which stocks see the biggest change in their required returns?) All stocks affected the same, regardless of beta Medium-beta stocks High-beta stocks Low-beta stocks on 16