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1. Suppose rRF = 9%, rM = 14%, and bi = 1.3. a. What is ri, the required rate of return on Stock i? b.

1. Suppose rRF = 9%, rM = 14%, and bi = 1.3. a. What is ri, the required rate of return on Stock i? b. Graph the SML. c. Now suppose rRF increases to 10% while the slope of the SML remains constant. How would this affect rM and ri? d. Graph the new SML.

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