Suppose r RF 7 , r M 13 , and b i 1 5 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 8 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 decrease by 1 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 2 Now suppose r RF decreases to 6 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 7 , but r M increases to 14 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 7 , but r M falls 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

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Posted on Oct 05, 2024

Suppose r_RF = 7%, r_M = 13%, and b_i = 1.5.

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 8%. 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 decrease by 1%.
2. Both r_M and r_i will remain the same.
3. Both r_M and r_i will increase by 1%.
4. r_M will remain the same and r_i will increase by 1%.
5. r_M will increase by 1% and r_i will remain the same.

2. Now suppose r_RF decreases to 6%. 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 7%, but r_M increases to 14%. 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 7%, but r_M falls 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 %.