Question

11. 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: 20. 01 REQUIRED RATE OF RETURN (Percent) Return on HC's Stock 0.5 - 10 RISK (Beta) 15 20

Answer 1

1.
=Y intercept
2%

2.
6%

3.
1

4.
8%

5.
=original return+inflation
8%+3%=11%

6.
Steeper

7.
The risk-free rate will remain constant