2. Now, suppose the Federal Reserve Board increases the money supply, causing the risk-free rate, RF, to drop to 3% and rm to fall to 10%. What would this do to the price of Upton Company's stock? a. SML variables: RF= %;rm= %;b= Solve the SML equation to find r. b. Gordon Model variables: D1=$ ;g= %;rs= % **Note that rS is the solution to the SML equation just solved. Solve the Gordon Model equation to find PO. 3. In addition to the change in Question #2, suppose investors' risk aversion declines; this fact, combined with the previous decline in RF, causes rm to fall to 8%. At what price would Upton Company's stock now sell? a. SML variables: RF= %;rm= %;b= Solve the SML equation to find rs. b. Gordon Model variables: D1=$ ;g= %;rs= % Note that rs is the solution to the SML equation just solved. Solve the Gordon Model equation to find Po. 2. Now, suppose the Federal Reserve Board increases the money supply, causing the risk-free rate, RF, to drop to 3% and rm to fall to 10%. What would this do to the price of Upton Company's stock? a. SML variables: RF= %;rm= %;b= Solve the SML equation to find r. b. Gordon Model variables: D1=$ ;g= %;rs= % **Note that rS is the solution to the SML equation just solved. Solve the Gordon Model equation to find PO. 3. In addition to the change in Question #2, suppose investors' risk aversion declines; this fact, combined with the previous decline in RF, causes rm to fall to 8%. At what price would Upton Company's stock now sell? a. SML variables: RF= %;rm= %;b= Solve the SML equation to find rs. b. Gordon Model variables: D1=$ ;g= %;rs= % Note that rs is the solution to the SML equation just solved. Solve the Gordon Model equation to find Po