Question
REQUIRED RATE OF RETURN Suppose rRF 5 4%, rM 5 10%, and bi = 1.4 a. What is ri, the required rate of return on
REQUIRED RATE OF RETURN Suppose rRF 5 4%, rM 5 10%, and bi = 1.4
a. What is ri, the required rate of return on Stock i?
b. Now suppose that rRF (1) increases to 5% or (2) decreases to 3%. The slope of the SML remains constant. How would this affect rM and ri?
c. Now assume that rRF remains at 4%, but rM (1) increases to 12% or (2) falls to 9%. The slope of the SML does not remain constant. How would these changes affect ri ?
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Financial Management EMEA Theory And Practice
Authors: Michael Ehrhardt, Roland Fox, Eugene Brigham
2nd Edition
1473760216, 9781473760219
