Suppose r RF 3 , r M 12 , and b i 1 7 What is r i , the required rate of return on Stock i Round your answer to two decimal places 1 Now suppose r RF increases to 4 The slope of the SML remains constant How would this affect r M and r i Both r M and r i will increase by 1 r M will remain the same and r i will increase by 1 r M will increase by 1 and r i will remain the same Both r M and r i will decrease by 1 Both r M and r i will remain the same ( Select I , II , III , IV , V ) 2 Now suppose r RF decreases to 2 The slope of the SML remains constant How would this affect r M and r i Both r M and r i will decrease by 1 r M will decrease by 1 and r i will remain the same r M will remain the same and r i will decrease by 1 Both r M and r i will increase by 1 Both r M and r i will remain the same ( Select I , II , III , IV , V ) c 1 Now assume that r RF remains at 3 , but r M increases to 13 The slope of the SML does not remain constant How would these changes affect r i Round your answer to two decimal places The new r i will be 2 Now assume that r RF remains at 3 , but r M falls to 11 The slope of the SML does not remain constant How would these changes affect r i Round your answer to two decimal places The new r i will be

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Suppose r RF = 3%, r M = 12%, and b i = 1.7. What is r i , the required rate of return on

Suppose r_RF = 3%, r_M = 12%, and b_i = 1.7.

What is r_i, the required rate of return on Stock i? Round your answer to two decimal places. % _______
1. Now suppose r_RF increases to 4%. The slope of the SML remains constant. How would this affect r_M and r_i?
1. Both r_M and r_i will increase by 1%.
2. r_M will remain the same and r_i will increase by 1%.
3. r_M will increase by 1% and r_i will remain the same.
4. Both r_M and r_i will decrease by 1%.
5. Both r_M and r_i will remain the same.
( -Select- I , II , III , IV , V )
2. Now suppose r_RF decreases to 2%. The slope of the SML remains constant. How would this affect r_M and r_i?
1. Both r_M and r_i will decrease by 1%.
2. r_M will decrease by 1% and r_i will remain the same.
3. r_M will remain the same and r_i will decrease by 1%.
4. Both r_M and r_i will increase by 1%.
5. Both r_M and r_i will remain the same.

( -Select- I , II , III , IV , V )

c. 1. Now assume that r_RF remains at 3%, but r_M increases to 13%. The slope of the SML does not remain constant. How would these changes affect r_i? Round your answer to two decimal places.

The new r_i will be _______ %.

2. Now assume that r_RF remains at 3%, but r_M falls to 11%. The slope of the SML does not remain constant. How would these changes affect r_i? Round your answer to two decimal places.

The new r_i will be _______ %.