Suppose r RF 8 , r M 13 , and b i 1 6 What is r i , the required rate of return on Stock i Round your answer to two decimal places Now suppose r RF increases to 9 The slope of the SML remains constant How would this affect r M and r i 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 Both r M and r i will increase by 1 r M will remain the same and r i will increase by 1 Now suppose r RF decreases to 7 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 Now assume that r RF remains at 8 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 Now assume that r RF remains at 8 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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Suppose r_RF = 8%, r_M = 13%, and b_i = 1.6.

What is r_i, the required rate of return on Stock i? Round your answer to two decimal places. %
Now suppose r_RF increases to 9%. The slope of the SML remains constant. How would this affect r_M and r_i?
1. r_M will increase by 1% and r_i will remain the same.
2. Both r_M and r_i will decrease by 1%.
3. Both r_M and r_i will remain the same.
4. Both r_M and r_i will increase by 1%.
5. r_M will remain the same and r_i will increase by 1%.
Now suppose r_RF decreases to 7%. 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.
Now assume that r_RF remains at 8% 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 % ???
Now assume that r_RF remains at 8% 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 % ???