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Suppose r R F = 9 % , r M = 1 5 % , and b i = Stock i ' s beta =

Suppose rRF=9%,rM=15%, and bi= Stock i's beta =1.4.
a. Calculate ri, the required rate of return on Stock i.
b. If rRF increases to 10% and the slope of the SML (Security Market Line) remains constant, calculate rM and ri.
c. If rRF decreases to 8% and the slope of the SML (Security Market Line) remains constant, calculate rM and ri.
d. Now assume rRF remains at 9%, but rM increases to 16% from 15%. If the slope of the SML does not remain constant, calculate ri.
e. Now assume rRF remains at 9%, but rM decreases to 14% from 15%. If the slope of the SML does not remain constant, calculate ri.
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