S an equity analyst you are concerned with what will happen to the required return for Universal Toddler's stock as market conditions change. Suppose rRF=4%,rM=12%, and bUT=1.7. a. Under current conditions, what is rU, the required rate of return on UT Stock? Round your answer to one decimal place. % b. 1. Now suppose rRF increases to 5%. The market risk premium, RP I. Both rM and rUT will remain the same. II. Both M and rUT will increase by 1 percentage point. III. M will remain the same and ruT will increase by 1 percentage point. IV. rM will increase by 1 percentage point and rut will remain the same. V. Both rM and rU will decrease by 1 percentage point. 2. Now suppose rRF decreases to 3%. The market risk premium, RP , (i.e., the slope of the SML) remains constant. How would this affect rM and rUT ? I. Both rM and rUT will decrease by 1 percentage point. II. rM will decrease by 1 percentage point and rUT will remain the same. III. rM will remain the same and rut will decrease by 1 percentage point. IV. Both rM and rUT will increase by 1 percentage point. V. Both rM and ru will remain the same. c. 1. Now assume rRF remains at 4% but rM increases to 14%. The market risk premium, RP , (i.e., the slope of the SML) does not remain constant. How would these changes affect ruT? I. rut will decrease by 3.4 percentage point. II. rut will remain the same. III. rur will increase by 3.4 percentage point. 2. Now assume rRF remains at 4% but rM falls to 11%. The market risk premium, RPM, (i.e., 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 percentage point. III. rut will increase by 1.7 percentage point