whoever see this question he should answer the while questions because all of them related to one question so that's why they are here all together
5. Changes to the security market line 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: 2 200 150 120 REQUIRED RATE OF RETURN(Percent) Rfum on HC's Stock 10 20.0 160 120 REQUIRED RATE OF RETURN (Percent) Rturn on HC's Stock - 40 05 15 LO RISK (Beta) 20 Value CAPM Elements Risk-tree rate (TR) Market risk premium (RPM) Happy Corp. stock's beta Required rate of return on Happy Corp. stock An analyst believes that inflation 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 (CAPM). The following graph plots the current SML Calculate Happy Corp's new required return. Then, on the graph, use the green points (rectangle symbols) to plot the new SME suggested by this analyst's prediction Happy Corp's new required rate of return is Tooltip: Mouse over the points on the graph to see the coordinates 20 10 NOW SML 20 16 New SML 2 REQUIRED RATE OF RETURN (Percent) 04 12 RISK (Beta) 16 20 The SML helps determine the risk aversion level among investors. The steeper the slope of the SML, the Which of the following statements best describes a shift in the SML caused by increased risk aversion? the level of risk version lower The risk-free rate will increase higher 15 RISK (Beta) 20 The SML helps determine the risk-aversion level among investors. The steeper the slope of the SML, the Which of the following statements bost describes a shift in the SML caused by increased risk aversion? the level of risk aversion. lower The risk-free rate will increase, higher The risk-free rate will decrease The risk-free rate will remain constant Value CAPM Elements Risk-free rate (TRF) Market risk premium (RPM) Happy Corp. stock's beta Required rate of return on Happy Corp. stock 8.0% 2.0% 2.2% An analyst believes that inflation is going to increa % over the next year, while the market risk the Capital Asset Pricing Model (CAPM). The follow 1.1% plots the current SML. Calculate Happy Corp.'s new required return. Then, on the graph, use the green points (rectangle cumh analyst's prediction CAPM Elements Value Risk-free rate (TRF) Market risk premium (RPM) Happy Corp. stock's beta Required rate of return on Happy Corp. stock 4.5% 10.8% An analyst believes that inflation is going to increa the Capital Asset Pricing Model (CAPM). The follow 6.0% over the next year, while the market risk premium will be un plots the current SML 7.8% Calculate Happy Corp.'s new required return. Then analyst's prediction faph, use the green points (rectangle symbols) to plot the news Value CAPM Elements Risk-free rate (TRF) Market risk premium (RPM) Happy Corp. stock's beta Required rate of return on Happy Corp. stock 2.3 An analyst believes that inflation is going to increal 0.3 % over the next year, while the marketisk premium will be unchange che Capital Asset Pricing Model (CAPM). The follow In plots the current SML. 1.6 Calculate Happy Corp's new required return. Then graph, use the green points (rectangle symbols) to plot the new SML sugo analyst's prediction 1.0 Happy Corp's new required rate of return is Tool in M Value CAPM Elements Risk-free rate (TRF) Market risk premium (RPM) Happy Corp. stock's beta Required rate of return on Happy Corp. stock 6.8% An analyst believes that inflation is going to increa y over the next year, while the mark the Capital Asset Pricing Model (CAPM). The follow 8.0% plots the current SML. Calculate Happy Corp.'s new required return. Then 7.2% aph, use the green points (rectangle analyst's prediction. 10.0% Happy Corp.'s new required rate of return is Corp. stock An analyst believes that inflation is going to increase by 3.0% over the next year, while the market risk premiu the Capital Asset Pricing Model (CAPM). The following graph plots the current SML. Calculate Happy Corp.'s new required return. Then, on the graph, use the green points (rectangle symbols) to pl analyst's prediction. Happy Corp.'s new required rate of return is Tool tip: Mouse over the points on the graph 12.1% eir coordinates 7.7% 25.3% ? 11.0% 20
