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REQUIRED RATE OF RETURN Suppose rRF = 7%, rM = 10%, and bi = 2.1. What is ri, the required rate of return on Stock

REQUIRED RATE OF RETURN

Suppose rRF = 7%, rM = 10%, and bi = 2.1.

What is ri, the required rate of return on Stock i? Round your answer to two decimal places.

%

1C. Now assume that rRF remains at 7%, but rM increases to 11%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to two decimal places.

The new ri will be %.

2. Now assume that rRF remains at 7%, but rM falls to 9%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to two decimal places.

The new ri will be %.

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