As an equity analyst you are concerned with what will happen to the required return to Universal Toddler' stock as market conditions change. Suppose rRF = 6%, rM = 10%, and bUT = 1.7. Under current conditions, what is rUT, the required rate of return on UT Stock? Round your answer to two decimal places.

% Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and rUT? I.Both rM and rUT will remain the same. II. Both rM and rUT will increase by 1%. III. rM will remain the same and rUT will increase by 1%. IV. rM will increase by 1% and rUT will remain the same. V. Both rM and rUT will decrease by 1%.

Suppose rRF decreases to 5%. The slope of the SML remains constant. How would this affect rM and rUT? I. rM will decrease by 1% and rUT will remain the same. II. rM will remain the same and rUT will decrease by 1%. III. Both rM and rUT will increase by 1%. IV. Both rM and rUT will remain the same. V. Both rM and rUT will decrease by 1%.

Now assume rRF remains at 6% but rM increases to 12%. The slope of the SML does not remain constant. How would these changes affect rUT? I. rUT will decrease by 3.4%. II. rUT will remain the same. III. rUT will increase by 3.4%.

Assume rRF remains at 6% but rM falls to 9%. The slope of the SML does not remain constant. How would these changes affect rUT? I. rUT will remain the same. II. rUT will decrease by 1.7%. III. rUT will increase by 1.7%.