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4. Suppose r RF = 9%, r M = 14%, and b i = 1.3. a. What is r i , the required rate of

4. Suppose r RF = 9%, r M = 14%, and b i = 1.3.

a. What is r i , the required rate of return on Stock i?

b. Graph the SML.

c. Now suppose r RF increases to 10% while the slope of the SML remains constant.

How would this affect r M and r i ?

d. Graph the new SML.

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