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Suppose r RF = 3%, r M = 12%, and b i = 1.4. 2. Now suppose r RF decreases to 2%. The slope of
Suppose rRF = 3%, rM = 12%, and bi = 1.4.
2. Now suppose rRF decreases to 2%. The slope of the SML remains constant. How would this affect rM and ri?
-Select-IIIIIIIVVItem 3
- What is ri, the required rate of return on Stock i? Round your answer to one decimal place.
%
- 1. Now suppose rRF increases to 4%. The slope of the SML remains constant. How would this affect rM and ri?
- Both rM and ri will decrease by 1 percentage point.
- Both rM and ri will remain the same.
- Both rM and ri will increase by 1 percentage point.
- rM will remain the same and ri will increase by 1 percentage point.
- rM will increase by 1 percentage point and ri will remain the same.
-Select-I II III IV V
- Both rM and ri will decrease by 1 percentage point.
- rM will decrease by 1 percentage point and ri will remain the same.
- rM will remain the same and ri will decrease by 1 percentage point.
- Both rM and ri will increase by 1 percentage point.
- Both rM and ri will remain the same.
- 1. Now assume that rRF remains at 3%, but rM increases to 13%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place.
The new ri will be %.
2. Now assume that rRF remains at 3%, but rM falls to 11%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place.
The new ri will be %.
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