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The following graph plots the current security market line (SML) and indicates the return that investors require from hoiding stock from Happy Corp. (HC). Based
The following graph plots the current security market line (SML) and indicates the return that investors require from hoiding stock from Happy Corp. (HC). Based on the graph, complete the table that follows: An analyst believes that infution is going to increase by 2.0% Doer the next year, while the market risk premum wil be anchanged. The analyat uses the Caputai Asset Pricing Model (CADM). The following graph plots the current 5ML Calculate Happy. Corp.I new required return. then, an the graph, use the green points (rectangle syreboli) bo plot the new sat suggested by thit analyst's Dredistion: Hapiy Cerpis hev hequied rate of retion is Iodi tip: Mouse over the polits on the graph fo see their coordinates The 5ML helps determine the risk-aversion level among investors. The higher the level of risk aversion, the the stope of the 5ML. Which of the following statements best describes the shape of the SML. if investors were not at all risk. awerse? The SML would be a horizontal line. The 5ML would have a positive slope, but the slope would be steeper than it would be if imvestors were risk averse: The SML would have a negative slope. The SML would have a pesitrie slope, but the slope would be flatter than it would be if investors were risk averse
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