Suppose r RF 5 , r M 11 , and b i 1 1 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 6 The slope of the SML remains constant How would this affect r M and r i SELECT ONE Both r M and r i will remain the same 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 2 Now suppose r RF decreases to 4 The slope of the SML remains constant How would this affect r M and r i SELECT ONE 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 Both r M and r i will decrease by 1 r M will decrease by 1 and r i will remain the same 1 Now assume that r RF remains at 5 , but r M increases to 12 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 5 , but r M falls to 10 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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Posted on Oct 06, 2024

Suppose r_RF = 5%, r_M = 11%, and b_i = 1.1.

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 6%. The slope of the SML remains constant. How would this affect r_M and r_i? SELECT ONE:
1. Both r_M and r_i will remain the same.
2. Both r_M and r_i will increase by 1%.
3. r_M will remain the same and r_i will increase by 1%.
4. r_M will increase by 1% and r_i will remain the same.
5. Both r_M and r_i will decrease by 1%.

2. Now suppose r_RF decreases to 4%. The slope of the SML remains constant. How would this affect r_M and r_i? SELECT ONE:

1. Now assume that r_RF remains at 5%, but r_M increases to 12%. 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 5%, but r_M falls to 10%. 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 ____ %.